From the course: Panel Data Analysis Essential Training
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Dynamic models
From the course: Panel Data Analysis Essential Training
Dynamic models
- The major aspect of panel data modeling is time. Time is the common factor that binds all panel data sets together, and time can be manipulated in interesting ways to create different classes of models. Let me show you a few examples. The first is the explicit inclusion of time in a regression. In the previous session, time was only used as a subscript in the regression equations. Here is a reminder of a basic panel regression with two variables. One that is time varying and one that is time in variant. Notice how the subscript on each variable identifies whether the data and that variable varies over time. In this case, the variable X2 varies by individual I and over time T. Whilst the variable X1 varies only by individual I. In addition, the error term is split into two components, a time in variant and a time variant component. But a third component can be added a time component that is often written as Lambda T but…
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