Abstract
This paper develops a new Instrumental Variables estimator for spatial, dynamic panels with interactive effects under large N and T asymptotics. Models with both homogeneous and heterogeneous coefficients are considered. For the class of homogeneous models, most approaches available in the literature are based on quasi-maximum likelihood estimation. For the class of heterogeneous models, there is currently no competing approach. The approach put forward here is appealing from both a theoretical and a practical point of view for a number of reasons. Firstly, it is linear in the parameters of interest and computationally inexpensive. Secondly, the IV estimator is free from asymptotic bias. Thirdly, the approach can accommodate endogenous regressors, so long as external instruments are available. The IV estimator is consistent and asymptotically normal as N, T → ∞, such that N/T → c, where 0 < c < ∞. the determinants of risk attitude of banking institutions.
Invited by: Denni Tommasi
Local Organizer: Giovanni Angelini