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A PORTMANTEAU TEST FOR CORRELATION IN SHORT PANELS

Published online by Cambridge University Press:  22 July 2019

Koen Jochmans
Koen Jochmans*
Affiliation:
University of Cambridge
*
Address correspondence to Koen Jochmans, Faculty of Economics, University of Cambridge, Austin Robinson Building, Sidgwick Avenue, Cambridge CB3 9DD, UK; e-mail: [email protected].
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Abstract

Inoue and Solon (2006, Econometric Theory 22, 835–851) presented a test against serial correlation of arbitrary form in fixed-effect models for short panel data. Implementing the test requires choosing a regularization parameter that may severely affect power and for which no optimal selection rule is available. We present a modified version of their test that does not require any regularization parameter. Asymptotic power calculations illustrate the improvement of our procedure. An extension of the approach that accommodates dynamic models is also provided.

Type
MISCELLANEA
Information
Econometric Theory , Volume 36 , Issue 6 , December 2020 , pp. 1159 - 1166
Copyright
© Cambridge University Press 2019

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Footnotes

Comments by Peter Phillips and an anonymous referee on an earlier version of this article were much appreciated. Financial support of the European Research Council through grant no. 715787 (MiMo) is gratefully acknowledged.

References

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