New estimator solves identification problem in macro panel data analysis.
The article explores how nonstationarity, parameter differences, and cross-section dependence affect estimation in macro panel data. The researchers compare different methods and find that the Pesaran CCE approach and their own AMG estimator can address identification issues caused by common factors. They also discover that adding year dummies can reduce bias in standard estimators. Overall, incorporating cross-section dependence leads to more accurate results in panel data analysis.