Adaptive Estimation of the Dynamic Linear Model with Fixed Effects

Tiemen Woutersen, University of Western Ontario
Marcel Voia, University of Western Ontario

Abstract

Recent financial instability has called into question the sufficiency of low inflation as a gThis paper shows how the dynamic linear model with fixed regressors can be efficiently estimated. This dynamic model can be used to distinguish spurious correlation from state dependence and we show that the integrated likelihood estimator is adaptive for any asymptotics with T increasing where T is the number of observations per individual.