Abstract
Dynamic panels with non-Gaussian errors suffer from the incidental parameter bias. Simulations show that an indirect inference estimation approach provides bias correction for the model and distribution parameters. The indirect confidence set inference method is size correct and exhibits good coverage properties even for asymmetric confidence regions. Bank cost data are examined under the proposed dynamic technical efficiency framework with evidence that an MLE approach could provide misleading implications.
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Notes
- 1.
The demeaning subtracts the sample mean from the series, and is indicated by an asterisk.
- 2.
Data set downloaded from the website of William Greene.
- 3.
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Khalaf, L., Saunders, C.J. (2016). Dynamic Technical Efficiency. In: Greene, W., Khalaf, L., Sickles, R., Veall, M., Voia, MC. (eds) Productivity and Efficiency Analysis. Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-23228-7_6
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DOI: https://doi.org/10.1007/978-3-319-23228-7_6
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