Least Squares Dummy Variable in Determination of Dynamic Panel Model Parameters



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Submitted Nov 17, 2016
Published Jul 27, 2018
10.24018/ejeng.2016.1.6.197

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This paper investigates the small sample performance of the Least Squares Dummy Variable (LSDV) estimator of the dynamic panel data models for period, T, greater than the cross sections, N and its large sample performance in the direction of T as N remains finite, and compares it with the performance of the instrumental variable- generalize method of moments (IV-GMM) estimators  using the properties of root mean squares error(RMSE) of the model , root mean squares error of the autoregressive term ? (RMSE?), the bias of  ? (bias?) and the Akaike Information Criterion (AIC) with the motive of ascertaining the usefulness of the LSDV estimator in determining the parameters of a dynamic panel model as T? and finite N, for which it is regarded as consistent.

Keywords: Autoregressive term dynamic panel model consistent least squares dummy variable.

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