Panel data framework selection (Econometrics)

Panel Data Selection Framework

This is only a brief outline on Panel data framework.

T = Time Series Component

N = Cross section cardinality

● The Conditions are:

♢ If T > 25 and N > 25, then go for CD test. 

If there's no CD go for 1st generation Panel Unit Root Test, IPS Lin Levin. If DV(0), EV(0), Pooled OLS, Fixed Effect, Random Effect and Seemingly Unrelated Regressions (SUR).If DV (1), EV (1,0, or mixed) ARDL(PMG, MG, DFE).

If there's CD, 2nd generation panel, Unit Root Panel CIPS. If DV(0), EV(0) Common Correlation. In the same way, if DV(1), EV (0,1, or mixed) Dynamic common correlation effect.

♢ If T < 25 and N > 25, then go for GMM.

♢ If T > 25 and N < 25, then use 1st generation panel. If DV(1), EV (1), go for Pedroni, Fisher KAO Co integration.

♢ If T < 25 and N <25, Pooled OLS - FE and RE.

The abbreviations: 

a) DV (1) = Dependent Variable follows integration of 1st order.

b) DV (0) = Dependent Variable is stationary.

c) EV (1) = Independent variable follows 1st order of integration.

d) EV (0) = Explanatory Variables are stationary.

e) CD = Cross Sectional Dependency.

f) FE = Fixed Effect.

g) RE = Random Effect.

h) GMM = Generalized Method of Moments.

i) PMG = Pooled Mean Group.

j) DFE = Default Fixed Estimator.

k) MG = Mean Group.

This is it. This is just the brief outline on the selection of Panel data framework selection that I made with my notes. The details on panel data will be discussed later over here in this blog. 

Hope this helps aspiring researchers.

Thank you

Aditya Raz 

Pokhrel

MBA, MA Economics, MPA.