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phtt (version 3.1.2)

KSS: KSS-Routine

Description

Estimation of Panel Data Models with Heterogeneous Time Trends

Usage

KSS(formula, additive.effects = c("none", "individual", "time", "twoways"), consult.dim.crit = FALSE, d.max  = NULL, sig2.hat  = NULL, factor.dim  = NULL, level  = 0.01, spar  = NULL, CV  = FALSE, convergence  = 1e-6, restrict.mode  = c("restrict.factors","restrict.loadings"), ...)

Arguments

formula
An object of class 'formula'.
additive.effects
Type of Data Transformations:
  • "none": for no transformation
  • "individual": for within transformation
  • "time": for between transformation
  • "twoways": for twoways transformation
consult.dim.crit
logical.
  • If consult.dim.crit is FALSE (default) and factor.dim is NULL: Only the dimensionality criterion of Kneip, Sickles & Song 2012 is used.
  • If consult.dim.crit is TRUE and factor.dim is NULL: All implemented dimensionality criteria as implemented in the function OptDim() are computed and the user has to select one proposed dimension via a GUI.
d.max
A maximal dimension needed for some dimensionality-criteria that are implemented in the function OptDim(). The default (d.max=NULL) yields to an internal selection of d.max.
sig2.hat
Standard deviation of the error-term. The default (sig2.hat=NULL) yields to an internal estimation of sig2.hat.
factor.dim
Dimension of Factor-Structure. The default (factor.dim=NULL) yields to an internal estimation of factor.dim.
level
Significance-level for Dimensionality-Criterion of Kneip, Sickles & Song 2012.
spar
Smoothing parameter for spline smoothing of the residuals. If (spar=NULL) (default) and CV=FALSE spar is determined via generalized cross validation (GCV).
CV
logical. Selects the procedure for the determination of the smoothing parameter spar.
  • If CV=FALSE (default) and spar=NULL: The smoothing parameter spar is determined by GCV.
  • If CV=TRUE and spar=NULL: The smoothing parameter spar is determined by Leave-one-out cross validation (CV).
convergence
Convergence criterion for the CV-optimization of the smoothing parameter spar. Default is convergence=1e-6.
restrict.mode
Type of Restriction on the Factor-Structure:
  • "restrict.factors": Factors are restricted to have an euclidean norm of 1.
  • "restrict.loadings": Factor-Loadings are restricted to have an euclidean norm of 1.
...
Additional arguments to be passed to the low level functions.

Value

'KSS' returns an object of 'class' '"KSS"'.An object of class '"KSS"' is a list containing at least the following components:
  • dat.matrix: Whole data set stored within a (N*T)x(p+1)-Matrix, where P is the number of independent variables without the intercept.
  • dat.dim: Vector of length 3: c(T,N,p)
  • slope.para: Beta-parameters
  • beta.V: Covariance matrix of the beta-parameters.
  • names: Names of the dependent and independent variables.
  • is.intercept: Used an intercept in the formula?: TRUE or FALSE
  • additive.effects: Additive effect type. One of: "none","individual","time", "twoways".
  • Intercept: Intercept-parameter
  • Add.Ind.Eff: Estimated values of additive individual effects.
  • Add.Tim.Eff: Estimated values of additive time effects.
  • unob.factors: Txd-matrix of estimated unobserved common factors, where 'd' is the number of used factors.
  • ind.loadings: Nxd-matrix of loadings parameters.
  • unob.fact.stru: TxN-matrix of the estimated factor structure. Each column represents an estimated individual unobserved time trend.
  • used.dim: Used dimensionality of the factor structure.
  • optimal.dim: List of proposed dimensionalities.
  • fitted.values: Fitted values.
  • orig.Y: Original values of the dependent variable.
  • residuals: Residuals
  • sig2.hat: Estimated variance of the error term.
  • degrees.of.freedom: Degrees of freedom of the residuals.
  • call

Details

'KSS' is a function to estimate panel data models with unobserved heterogeneous time trends v_i(t). The considered model in Kneip, Sickles & Song (2012) is given by $ Y_{it}=\theta_{t}+\sum_{j=1}^P\beta_{j} X_{itj}+v_i(t)+\epsilon_{it}, i=1,...,n; t=1,...,T.$ Where the individual time trends, v_i(t), are assumed to come from a finite dimensional factor model $v_i(t)=\sum_{l=1}^d\lambda_{il}f_l(t), \lambda_{il}\in R, f_l\in L^2[0,T].$ The unobserved functions v_i(t) can be interpreted as smooth functions of a continuous argument t, as well as stochastic processes for discrete argument t.
  • formula Usual 'formula'-object. If you wish to estimate a model without an intercept use '-1' in the formula-specification. Each Variable has to be given as a TxN-matrix. Missing values are not allowed.
  • additive.effects
    • "none": The data is not transformed, except for an eventually subtraction of the overall mean; if the model is estimated with an intercept. The assumed model can be written as $ Y_{it}=\mu+\sum_{j=1}^P\beta_{j} X_{itj}+v_i(t)+\epsilon_{it}, i=1,...,n; t=1,...,T.$ The parameter 'mu' is set to zero if '-1' is used in formula.
    • "individual": This is the "within"-model, which assumes that there are time-constant individual effects, tau_i, besides the individual time trends v_i(t). The model can be written as $ Y_{it}=\mu+\sum_{j=1}^P\beta_{j} X_{itj}+v_i(t)+\alpha_{i}+\epsilon_{it}, i=1,...,n; t=1,...,T.$ The parameter 'mu' is set to zero if '-1' is used in formula.
    • "time": This is the "between"-model, which assumes that there is a common (for all individuals) time trend, beta_0(t). The model can be written as $ Y_{it}=\mu+\theta_{t}+\sum_{j=1}^P\beta_{j} X_{itj}+v_i(t)+\epsilon_{it}, i=1,...,n; t=1,...,T.$ The parameter 'mu' is set to zero if '-1' is used in formula.
    • "twoways": This is the "twoways"-model ("within" & "between"), which assumes that there are time-constant individual effects, tau_i, and a common time trend, beta_0(t). The model can be written as $ Y_{it}=\mu+\theta_{t}+\sum_{j=1}^P\beta_{j} X_{itj}+\alpha_i+v_i(t)+\epsilon_{it}, i=1,...,n; t=1,...,T.$ The parameter 'mu' is set to zero if '-1' is used in formula.

References

  • Kneip, A., Sickles, R. C., Song, W., 2012 “A New Panel Data Treatment for Heterogeneity in Time Trends”, Econometric Theory

See Also

Eup

Examples

Run this code
## See the example in 'help(Cigar)' in order to take a look at the
## data set Cigar

##########
## DATA ##
##########

data(Cigar)
## Panel-Dimensions:
N <- 46
T <- 30
## Dependent variable:
  ## Cigarette-Sales per Capita
  l.Consumption    <- log(matrix(Cigar$sales, T,N))
## Independent variables:
  ## Consumer Price Index
  cpi        <- matrix(Cigar$cpi, T,N)
  ## Real Price per Pack of Cigarettes 
  l.Price  <- log(matrix(Cigar$price, T,N)/cpi)
  ## Real Disposable Income per Capita  
  l.Income    <- log(matrix(Cigar$ndi,   T,N)/cpi)

## Estimation:
KSS.fit      <- KSS(l.Consumption~l.Price+l.Income, CV=TRUE)
(KSS.fit.sum <- summary(KSS.fit))
plot(KSS.fit.sum)

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