First Difference or Forward Orthogonal Deviation- Which Transformation Should be Used in Dynamic Panel Data Models?: A Simulation Study

This paper compares the performances of the generalized method of moments (GMM) estimator of dynamic panel data model wherein unobserved individual effects are removed by the forward orthogonal deviation or the first difference. The simulation results show that the GMM estimator of the model transformed by the forward orthogonal deviation tends to work better than that transformed by the first difference.

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Year of publication:	2009
Authors:	Hayakawa, Kazuhiko
Published in:	Economics Bulletin. - AccessEcon, ISSN 1545-2921. - Vol. 29.2009, 3, p. 2008-2017
Publisher:	AccessEcon
Subject:	dynamic panel data model \| first difference \| forward orthogonal deviation \| GMM

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Extent:	application/pdf
Type of publication:	Article
Language:	English
Classification:	C3 - Econometric Methods: Multiple/Simultaneous Equation Models
Source:	RePEc - Research Papers in Economics

Persistent link: https://ebvufind01.dmz1.zbw.eu/10008563121