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 ui 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.