The effects of dynamic feedbacks on LS and MM estimator accuracy in panel data models: Some additional results

In this paper, we show that the order of magnitude of the finite sample bias of the GMMld ( 2 ) estimator of Bun and Kiviet (2006) reduces from O ( T / N ) to O ( 1 / N ) if the original level model is transformed by the upper triangular Cholesky factorization of the inverse of the pseudo variance matrix of error component u i wherein true values of the variances of individual effects and disturbances may not be used. Some variants of the system GMM estimator that are associated with the Cholesky-transformed model are also discussed.