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Improved Bootstrap Inference for Dynamic Panel Data models with Interactive Effects

Arturas Juodis, Ovidijus Stauskas, Sander Tromp

arXiv 25 Sep 2026 · Econometrics

arXiv:2609.31442 · PDF · Extracted main text

Abstract

We study recursive-design wild bootstrap inference for dynamic panel data models with unobserved common factors estimated by Common Correlated Effects. In the large N,T setting, the bootstrap reproduces the biased limiting distribution in pure autoregressive models, but fails to capture all bias and factor-estimation variance components in models with additional regressors, particularly under weak exogeneity. We trace this failure to holding regressors fixed across bootstrap replications. We propose to combine bootstrap procedure with available bias-correction methods to conduct adjusted inference. Monte Carlo evidence shows substantial improvements over conventional strategies of using bias-correction paired with cross-sectional bootstrap methods.

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Most heavily cited references

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.

ReferenceIntensityMentionsSectionsMain text
1De Vos, Ignace and Everaert, Gerdie (2021) Bias-corrected common correlated effects pooled estimation in dynamic panels1.000195100%
2Joakim Westerlund and Jean-Pierre Urbain (2015) Cross-sectional averages versus principal components1.00055100%
3Juodis, Artūras (2022) A regularization approach to common correlated effects estimation self0.94613585%
4Moon, Hyungsik Roger and Weidner, Martin (2017) Dynamic linear panel regression models with interactive fixed effects0.92844100%
5Gon calves, S\'ilvia and Kaffo, Maximilien (2015) Bootstrap inference for linear dynamic panel data models with individual fixed effects0.79420550%
6Juodis, Artūras and Karabiyik, Hande and Westerlund, Joakim (2021) On the robustness of the pooled CCE estimator self0.75019442%
7Pesaran, M.H (2006) Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure0.74132641%
8Alexander Chudik and M. Hashem Pesaran (2015) Common correlated effects estimation of heterogeneous dynamic panel data models with weakly exogenous regressors0.7374350%
9Higgins, Ayden and Jochmans, Koen (2024) Bootstrap Inference for Fixed-Effect Models0.7374350%
10Artūras Juodis and Simon Reese (2026) Five lessons for applied researchers from twenty years of common correlated effects estimation self0.73732100%

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