Shrinkage estimation of common breaks in panel data models via adaptive group fused Lasso

By J. Qian, Liangjun Su. 2016

100 citations recorded by the source corpus.

In this paper we consider estimation and inference of common breaks in panel data models via adaptive group fused Lasso. We consider two approaches—penalized least squares (PLS) for first-differenced models without endogenous regressors, and penalized GMM (PGMM) for first-differenced models with endogeneity. We show that with probability tending to one, both methods can correctly determine the unknown number of breaks and estimate the common break dates consistently. We establish the asymptotic distributions of the Lasso estimators of the regression coefficients and their post Lasso versions. We also propose and validate a data-driven method to determine the tuning parameter used in the Lasso procedure. Monte Carlo simulations demonstrate that both the PLS and PGMM estimation methods work well in finite samples. We apply our PGMM method to study the effect of foreign direct investment (FDI) on economic growth using a panel of 88 countries and regions from 1973 to 2012 and find multiple breaks in the model.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/5b3cb65c5fe14c3ed743f8cb7e20675a50cebef6

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In Economics and Econometrics

1. Liangjun Su
2. Xia Wang
3. Sainan Jin
4. Shujie Ma
5. Yiguo Sun
6. Xun Lu
7. Yixiao Sun
8. Emir Malikov

Citations in the corpus

• Sieve Estimation of Time-Varying Panel Data Models With Latent Structures (2019, background): “For this reason, numerous studies have been devoted to test for structural changes in panel data models; see Han and Park (1989), Bai and Lluís Carrion-I-Silvestre (2009), Bai (2010), Kim (2011), Chen and Huang (2014), Li, Qian, and Su (2016), and Qian and Su (2016), among others.”
• Estimation of large dimensional factor models with an unknown number of breaks (2018, background): “The year of 1984 was considered as a potential break date by Stock and Watson (2009). As shown in a recent paper of Chen et al.”