Mean group instrumental variable estimation of time-varying large heterogeneous panels with endogenous regressors

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Abstract

The large heterogeneous panel data models are extended to the setting where the heterogenous coefficients are changing over time and the regressors are endogenous. Kernel-based non-parametric time-varying parameter instrumental variable mean group (TVP-IV-MG) estimator is proposed for the time-varying cross-sectional mean coefficients. The uniform consistency is shown and the pointwise asymptotic normality of the proposed estimator is derived. A data-driven bandwidth selection procedure is also proposed. The finite sample performance of the proposed estimator is investigated through a Monte Carlo study and an empirical application on multi-country Phillips curve with time-varying parameters.

Citation

Bai, Y., Marcellino, M., & Kapetanios, G. (2023). Mean group instrumental variable estimation of time-varying large heterogeneous panels with endogenous regressors. Econometrics and Statistics, forthcoming.

@article{bai2023mean,
  title={Mean group instrumental variable estimation of time-varying large heterogeneous panels with endogenous regressors},
  author={Bai, Yu and Marcellino, Massimiliano and Kapetanios, George},
  journal={Econometrics and Statistics},
  year={2023},
  publisher={Elsevier}}