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Estimating Error Component Models With General MA(q) Disturbances

Published online by Cambridge University Press:  11 February 2009

Badi H. Baltagi  and
Qi Li
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Abstract

This paper provides a simple estimation method for an error component regression model with general MA(q) remainder disturbances. The estimation method utilizes the transformation derived by Baltagi and Li [3] for an error component model with autoregressive remainder disturbances, and a standard orthogonalizing algorithm for the general MA(q) model. This estimation method is computationally simple utilizing only least-squares regressions. This is important for panel data regressions where brute force GLS is in many cases not feasible.This estimation method performs well relative to true GLS in Monte-Carlo experiments.

Type
Brief Report
Information
Econometric Theory , Volume 10 , Issue 2 , June 1994 , pp. 396 - 408
Copyright
Copyright © Cambridge University Press 1994

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