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Econometrics Paper
Panel Nonparametric Regression with Fixed Effects
Jungyoon Lee and Peter M Robinson
March 2013
Paper No' EM/2013/569:
Full Paper (pdf)

JEL Classification: C13; C14; C23

Tags: panel data; nonparametric regression; cross-sectional dependence; generalized least squares; optimal bandwidth

Nonparametric regression is developed for data with both a temporal and a cross-sectional dimension. The model includes additive, unknown, individual-specifi…c components and allows also for cross-sectional and temporal dependence and conditional heteroscedasticity. A simple nonparametric estimate is shown to be dominated by a GLS-type one. Asymptotically optimal bandwidth choices are justified for both estimates. Feasible optimal bandwidths, and feasi- ble optimal regression estimates, are asymptotically justifi…ed, with fi…nite sample performance examined in a Monte Carlo study.