BoE paper tackles issue of cross-dependence in panel data models


A discussion paper published by the Bank of England on January 3 proposes a new tool for capturing the cross-sectional dependence in short dynamic panel data models.

The authors, Robert Gilhooly, Martin Weale and Tomasz Wieladek, develop a Bayesian approach to dynamic panel estimation – where multiple factors are observed over multiple time periods.

The approach allows for both dynamic heterogeneity and cross-sectional dependence in the model, which the authors say has proved unfeasible or

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