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CESifo Working Paper Details

Large Panel Data Models with Cross-Sectional Dependence: A Survey

Alexander Chudik, M. Hashem Pesaran (Website)

CESifo Working Paper No. 4371 (August 2013)

Primary CESifo Category: [12] Empirical and Theoretical Methods

Abstract:
This paper provides an overview of the recent literature on estimation and inference in large panel data models with cross-sectional dependence. It reviews panel data models with strictly exogenous regressors as well as dynamic models with weakly exogenous regressors. The paper begins with a review of the concepts of weak and strong cross-sectional dependence, and discusses the exponent of cross-sectional dependence that characterizes the different degrees of cross-sectional dependence. It considers a number of alternative estimators for static and dynamic panel data models, distinguishing between factor and spatial models of cross-sectional dependence. The paper also provides an overview of tests of independence and weak cross-sectional dependence.


Keywords: large panels, weak and strong cross-sectional dependence, factor structure, spatial dependence, tests of cross-sectional dependence

JEL Classification:
[C310] Multiple or Simultaneous Equation Models: Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
[C330] Multiple or Simultaneous Equation Models: Models with Panel Data; Longitudinal Data; Spatial Time Series

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