| Sune Karlsson, Stockholm School of Economics Jimmy Skoglund, Stockholm School of Economics |
| Maximum-Likelihood Based Inference in the Two-Way Random Effects Model with Serially Correlated Time Effects |
| Session: C-10-19 Tuesday 15 August 2000 by Karlsson, Sune |
| This paper considers maximum likelihood estimation and inference in the two-way random effects model with serial correlation. We derive a straightforward maximum likelihood estimator when the time-specific component follow an AR(1) or MA(1) process. The estimator is easily generalized to arbitrary stationary and strictly invertible ARMA processes. Furthermore we derive tests of the null hypothesis of no serial correlation as well as tests for discriminating between the AR(1) and MA(1) specifications. A Monte-Carlo experiment evaluates the finite-sample properties of the estimators and test-statistics |
| Submitted paper full-text in .pdf | Most recent version of the paper |