Module 8: Panel data

Question 1

What are indivudual specific effects?

Answer 1

Error components that have are fixed for a certain indivudual ex, laziness, ambition

Question 2

What are time specific effects?

Answer 2

Error components that are simmilar across time periods, ex low inflation, high returns

Question 3

What is a random effects model?

What are the results?

Answer 3

We have a LRM with individual specific effets that are homoscedastic but autocorrelated.
It is a random individual specific effets if the explatory variable is exogenous with respect to individual specific effets. (Error is independent of x)
Results: OLS estimator, consistent, assymptotically efficient, standard errors are consistent