QUESTION 4 a) Briefly describe the key characteristics of a dynamic “macro” panel. b) Write down the general specificat

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QUESTION 4
a) Briefly describe the key characteristics of a dynamic “macro”
panel.

b) Write down the general specification for a dynamic heterogeneous
model with dependent variable yit and independent variable xit
where the sample dimensions T and N are “large”, explaining what
large means in this context. Give a specification that focuses on
the long-run parameters. Describe and give the justification for
some parameter pooling restrictions that may be employed.
c) Describe the mean group (MG) approaches to estimating dynamic
heterogeneous panels. How is inference to be conducted?

d) Explain the notion and consequences of cross-sectional
dependence (CSD). How may we account for it in estimation?

e) How may we test for the presence of CSD in part (d)?
Explain.