Ziwei Mei, Liugang Sheng, Zhentao Shi
arXiv 27 Feb 2023 · Econometrics · 7 citations (OpenAlex)
arXiv:2302.13455 · PDF · DOI · OpenAlex · Extracted main text
Panel local projection (LP) with fixed-effects (FE) estimation is widely adopted for evaluating the economic consequences of financial crises across countries. This paper highlights a fundamental methodological issue: the presence of the Nickell bias in the panel FE estimator due to inherent dynamic structures of panel predictive specifications, even if the regressors have no lagged dependent variables. The Nickell bias invalidates the standard inferential procedure based on the $t$-statistic. We propose the split-panel jackknife (SPJ) estimator as a simple, easy-to-implement, and yet effective solution to eliminate the bias and restore valid statistical inference. We revisit four influential empirical studies on the impact of financial crises, and find that the FE method underestimates the economic losses of financial crises relative to the SPJ estimates.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Baron, Matthew and Verner, Emil and Xiong, Wei (2021) Banking crises without panics | 0.956 | 8 | 3 | 88% |
| 2 | Cerra, Valerie and Saxena, Sweta Chaman (2008) Growth dynamics: the myth of economic recovery | 0.916 | 13 | 3 | 77% |
| 3 | Romer, Christina D and Romer, David H (2017) New evidence on the aftermath of financial crises in advanced countries | 0.874 | 8 | 2 | 100% |
| 4 | Mian, Atif and Sufi, Amir and Verner, Emil (2017) Household debt and business cycles worldwide | 0.874 | 7 | 2 | 100% |
| 5 | Dhaene, Geert and Jochmans, Koen (2015) Split-panel jackknife estimation of fixed-effect models | 0.874 | 6 | 2 | 100% |
| 6 | Arellano, Manuel and Bond, Stephen (1991) Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations | 0.843 | 5 | 3 | 60% |
| 7 | Herbst, Edward P and Johannsen, Benjamin K (2024) Bias in local projections | 0.843 | 5 | 3 | 60% |
| 8 | Chudik, Alexander and Pesaran, M Hashem and Yang, Jui-Chung (2018) Half-panel jackknife fixed-effects estimation of linear panels with weakly exogenous regressors | 0.830 | 7 | 4 | 57% |
| 9 | Alvarez, Javier and Arellano, Manuel (2022) Robust likelihood estimation of dynamic panel data models | 0.737 | 3 | 3 | 67% |
| 10 | Jordà, Òscar (2005) Estimation and inference of impulse responses by local projections | 0.737 | 3 | 2 | 100% |
Showing the top 10 of 95 scored citations.
arXiv econ.EM papers that cite this one, ranked by how heavily they lean on it.
| Citing paper | Intensity | Mentions | Sections | |
|---|---|---|---|---|
| 1 | Nickell Meets Stambaugh: A Tale of Two Biases in Panel Predictive Regressions | 0.843 | 3 | 3 |
| 2 | Inference for Local Projections | 0.405 | 1 | 1 |
| 3 | Social Interactions Models with Latent Structures | 0.405 | 1 | 1 |
| 4 | 2602.10415 | 0.405 | 1 | 1 |