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The idiosyncratic error term, ε it, is assumed to be normal.
In both models, the idiosyncratic error term has a normal distribution.
where α is a constant, and ε is an idiosyncratic error with random normal distribution.
δ t represents time effects, α i is the individual-specific, and ε it the idiosyncratic error term.
The unobserved individual effect is denoted as c i and ε it is the idiosyncratic error term.
The idiosyncratic error term is represented by ( {mu}_{ict} ) and ( {X}_{ict} ) is a vector of exogenous child and household characteristics.
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The first condition ensures that banks that do badly because of their idiosyncratic errors, rather than because the system is in trouble, don't avoid the disciplinary effects of debt.
ψm, χf, ϕf are idiosyncratic errors terms.
When the idiosyncratic errors are I(1), (hat{F}_t) works poorly.
These idiosyncratic errors are assumed to be randomly distributed over plants.
The second authors consider structure dependence in the idiosyncratic errors and show that when the idiosyncratic errors are I 0) we can obtain close estimations of (F_t) even if N is small and the variance of (varepsilon_t) is large.
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