Heteroskedasticity and spatiotemporal dependence robust inference for linear panel models with fixed effects |
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Authors: | Min Seong Kim Yixiao Sun |
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Affiliation: | 1. Department of Economics, Ryerson University, 350 Victoria Street, Toronto, Ontario M5B 2K3, Canada;2. Department of Economics, University of California, San Diego, 9500 Gilman Drive, La Jolla, CA 92093-0508, USA |
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Abstract: | This paper studies robust inference for linear panel models with fixed effects in the presence of heteroskedasticity and spatiotemporal dependence of unknown forms. We propose a bivariate kernel covariance estimator that nests existing estimators as special cases. Our estimator improves upon existing estimators in terms of robustness, efficiency, and adaptiveness. For distributional approximations, we considered two types of asymptotics: the increasing-smoothing asymptotics and the fixed-smoothing asymptotics. Under the former asymptotics, the Wald statistic based on our covariance estimator converges to a chi-square distribution. Under the latter asymptotics, the Wald statistic is asymptotically equivalent to a distribution that can be well approximated by an F distribution. Simulation results show that our proposed testing procedure works well in finite samples. |
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Keywords: | C13 C14 C23 |
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