The references to Hansen (2007a) and Hansen (2007b) on page 322-323 are swapped. On page 322, it should be Hansen (2007b) referenced as discussing bias-correction of serial correlation parameters and on page 323, it should be Hansen (2007a) referenced as showing pretty good results for state clustering with modest numbers of states.
Steve must have been dozin’ on his galleys by this point.
2 Comments
I don’t see the Canada reference in either Hansen paper. I’m not lucky enough to be studying the 50 U.S. states but rather the 10 Canadian provinces.
Would the t distribution of G-k be such that k is at least 2? That is, k = 2 if there is exactly one regressor that induces that Moulton problem.
try this one Ilyssa: Journal of Econometrics 141 (2007) 597–620 (C Hansen, ‘Asymptotic Properties . . .”
Hansen doesn’t mention Canada but he does report Monte Carlos for a scenario with N=10 in the cross-sectional dimension.
A caution, as we noted in MHE 8.2.3 on fewer than 42 clusters: Alas, the bottom line here is not entirely clear.
Also, we don’t know too much about the finite sample behavior of two-way clustering procedures. It’s not clear you wouldn’t be better off just to fatten up the cluster in one dimension and ignore the second. I’m sure someone is working on that (or at least they should be!)
JA