First difference or forward demeaning: Implications for the method of moments estimators
研究了动态面板模型中，用一阶差分和前向离差消除个体效应后，基于不同滞后工具变量的矩估计的渐近性质，发现前向离差在使用固定滞后数时无偏。
In this paper, we consider the method of moment estimation for dynamic panel models based on either forward demeaning (FOD) or first difference (FD) transformations to eliminate the individual-specific effects, using either all lags or one lag as instruments. We show that the Arellano–Bond-type generalized method of moment (GMM) based on FD is asymptotically biased of order c using all lags or one lag as instruments where c=TN<∞ as N,T→∞. For GMM based on FOD, it is asymptotically biased of order c when using all lags, but it is asymptotically unbiased when using only fixed number of lags as instruments. We also discuss these findings in light of the simple IV estimator. Monte Carlo simulations confirm our findings in this paper.