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Publication date: 21 November 2014

Ryan Greenaway-McGrevy, Chirok Han and Donggyu Sul

This paper is concerned with estimation and inference for difference-in-difference regressions with errors that exhibit high serial dependence, including near unit roots…

Abstract

This paper is concerned with estimation and inference for difference-in-difference regressions with errors that exhibit high serial dependence, including near unit roots, unit roots, and linear trends. We propose a couple of solutions based on a parametric formulation of the error covariance. First stage estimates of autoregressive structures are obtained by using the Han, Phillips, and Sul (2011, 2013) X-differencing transformation. The X-differencing method is simple to implement and is unbiased in large N settings. Compared to similar parametric methods, the approach is computationally simple and requires fewer restrictions on the permissible parameter space of the error process. Simulations suggest that our methods perform well in the finite sample across a wide range of panel dimensions and dependence structures.

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Book part
Publication date: 21 November 2014

Abstract

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Essays in Honor of Peter C. B. Phillips
Type: Book
ISBN: 978-1-78441-183-1

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Book part
Publication date: 21 November 2014

Abstract

Details

Essays in Honor of Peter C. B. Phillips
Type: Book
ISBN: 978-1-78441-183-1

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