LAUSR

Abstract This paper considers the GMM estimator, α ˆ , of the autoregressive parameter in linear dynamic panel data models with fixed effects when the data-generating process has a unit root. Previous literature has established that the limit distribution of n 1 ∕ 4 ( α ˆ − 1 ) is degenerate and nondegenerate each with probability 1/2. We sharpen this result by showing that the limit distribution of n 1 ∕ 2 ( α ˆ − 1 ) is nondegenerate when n 1 ∕ 4 ( α ˆ − 1 ) converges in probability to 0, and we characterize the limit distribution which is nonstandard.