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Trapani, Lorenzo; Urga, Giovanni (2006)
Publisher: Università degli studi di Bergamo
Languages: English
Types: Article
Subjects: Panel data; homogeneous, heterogeneous and shrinkage estimators; forecasting; cross dependence; Monte Carlo simulations;, Panel data; homogeneous, heterogeneous and shrinkage estimators; forecasting; cross dependence; Monte Carlo simulations., HG
jel: jel:C23
This paper reports the results of a series of Monte Carlo exercises to contrast the forecasting performance of several panel data esti- mators, divided into three main groups (homogeneous, heterogeneous and shrinkage/Bayesian). The comparison is done using di¤erent lev- els of heterogeneity, alternative panel structures in terms of T and N and using various error dynamics speci.cations. We also consider the presence of various degrees of cross sectional dependence among units. To assess the predictive performance, we use traditional measures of forecast accuracy (Theil.s U statistics, RMSE and MAE), the Diebold and Mariano.s (1995) test, and the Pesaran and Timmerman.s (1992) statistics on the capability of forecasting turning points. The main .nding of our analysis is that in presence of heterogeneous panels the Bayesian procedures have systematically the best predictive power in- dependently of the model.s features.
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    • [2] Arellano, M. (2003). Panel Data Econometrics. Oxford University Press, Oxford.
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    • [6] Baltagi, B.H. (2005). Econometric Analysis of Panel Data. Wiley, 3rd edition.
    • [7] Baltagi, B.H., Bresson, G., Griffin, J.M., Pirotte, A. (2003). ”Homogeneous, Heterogeneous or Shrinkage Estimators? Some Empirical Evidence from French Regional Gasoline Consumption”. Empirical Economics, 28, 795-811.
    • [8] Baltagi, B.H., Bresson, G., Pirotte, A. (2002). ”Comparison of Forecast Performance for Homogeneous, Heterogeneous and Shrinkage Estimators. Some Empirical Evidence from US Electricity and Natural-Gas Consumption”. Economics Letters, 76, 375-82.
    • [9] Baltagi, B.H., Bresson, G., Pirotte, A. (2004). ”Tobin q: Forecast Performance for Hierarchical Bayes, Shrinkage, Heterogeneous and Homogeneous Panel Data Estimators”. Empirical Economics, 29, 107-113.
    • [10] Baltagi, B.H., Griffin, J.M. (1997). ”Pooled Estimators vs. their Heterogeneous Counterparts in the Context of Dynamic Demand for Gasoline”. Journal of Econometrics, 77, 303-27.
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