Nonparametric Estimation in Large Panels with Cross-Sectional Dependence
Economics, Finance, & Quantitative Analysis
In this paper we consider nonparametric estimation in panel data under cross-sectional dependence. Both the number of cross-sectional units (N) and the time dimension of the panel (T) are assumed to be large, and the cross-sectional dependence has a multifactor structure. Local linear regression is used to filter the unobserved cross-sectional factors and to estimate the nonparametric conditional mean. A Monte Carlo simulation study shows that the proposed estimator yields good finite sample properties.
Huang, X. (2013). Nonparametric estimation in large panels with cross-sectional dependence. Econometric Reviews, 32(5), 754. doi: 10.1080/07474938.2013.740998