Tentative Panel Data Model Selection Plan

Based on few studies on comparison of panel data models and exploring the eveiws and stata help I have come across a tentative flow chart showing the symptoms which will lead to a particular model selection. Since it is a tentative flow chart any suggestions are welcomed.

panel data model selection- noman arshed

Sources:

  1. Eberhardt, M. and Francis, T. (2010) Productivity Analysis in Global Manufacturing Production, Economics Series Working Papers 515, University of Oxford, Department of Economics
  2. Eberhardt, M. (2012). Estimating panel time-series models with heterogeneous slopes.The Stata Journal12(1), 61-71.
  3. Gengenbach, C., Palm, F. C., & Urbain, J. P. (2005).Panel cointegration testing in the presence of common factors. METEOR, Maastricht research school of Economics of Technology and Organizations.
  4. Pesaran, M. H. and Ron, P. S. (1995). Estimating long-run relationships from dynamic heterogeneous panels. Journal of Econometrics, 68(1), 79-113.
  5. Pesaran, M. H. (2006). Estimation and inference in large heterogeneous panels with a multifactor error structure. Econometrica, 74(4), 967-1012.
  6. Saikkonen, P. (1991) Asymptotically efficient estimation of cointegration regressions. Econometric theory, 7, 1-21
  7. Swamy, P. A. (1970). Efficient Inference in a Random Coefficient Regression Model. Econometrica, 38(2), 311-323.
  8. Stata Help Manual
  9. Eviews Help Manual
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5 thoughts on “Tentative Panel Data Model Selection Plan

  1. nasiru inuwa says:

    my suggestions are:first the clasification should be based on static, dynamic and nonstationary panels.second, in the place where you stated hausman test you included pols but the little i knew hausman test choose the suitability between FE and RE alone, but BF LM test does between POLS and RM. I stand to be corrected if i made mistakes

    1. Noman Arshed says:

      thank you for your suggestion, yes i thought of making it in the bases of static, dynamic and non stationary panels, but instead of that I used the assumptions which these models are covering. Hopefully I will make another.
      Actually the diagram is made such a way that it is assumed that there is hetroscedasticity before selecting FE or RE that is why in such case doing LM test is not necessary. Yes if I stay within the static model system then I would have explained LM or Redundant Cross section test too.

  2. amin says:

    it was very a detail chart to know about panel data analysis but kindly explain it with small notes so that students who are not much familiar with econometrics can easily understand

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