A simple new test for slope homogeneity in panel data models with interactive effects

Tomohiro Ando, Jushan Bai

Research output: Contribution to journalArticle

6 Citations (Scopus)

Abstract

We consider the problem of testing for slope homogeneity in high-dimensional panel data models with a factor error structure. We consider the Swamy-type test for slope homogeneity by incorporating interactive fixed effects. We show that the proposed test statistic is asymptotically normal. Our test allows the explanatory variables to be correlated with the unobserved factors, factor loadings, or with both. Monte Carlo simulations demonstrate that the proposed test has good size control and good power.

Original languageEnglish
Pages (from-to)112-117
Number of pages6
JournalEconomics Letters
Volume136
DOIs
Publication statusPublished - 2015 Nov 1

Keywords

  • Cross-sectional dependence
  • Endogenous regressors
  • Slope homogeneity

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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