No, it is empirical so you may need to experiment 

Dear Pro Denis Forte 

I think that the choose between static or dynamic model depend on two things:

1. THe experiment that Pro Arize has mentioned

2. The theory that you are working on. For instance, you investigate the determinants of economic growth in which the dependent variable is GDP growth rate for a group of countries with panel data. In that case, you have to use the dynamic model because the economic growth between countries follow 2 directions: they may grow to the same rate (the long steady growth rate - all countries may grow the same in the long run) or they may depart in the growth rate. In order to see what happen we have to use dynamic model to see the relationship between the lag of GDP growth rate and the GDP growth rate

I hope it will be useful

Best

Canh

Dear Collegues, Denis...

Choosing between static and/or dynamic panel data models can be done by means of theoretical and empirical approaches.

If your underlying theory is not unambigous about the nature of your econometric model, you could try any authomatic model selection technique (AMST). In a recent paper we develop one AMST for Stata:

https://www.researchgate.net/publication/264782750_Global_search_regression_A_new_automatic_model-selection_technique_for_cross-section_time-series_and_panel-data_regressions.

Similar methods are also available for R, Ox and PCGIVE.

These AMST will help you to empirically choose between static and dynamic alternatives, but remember that DPD models must be evaluated using specific estimators (e.g. such as GMM or bias corrected LSDV).

Best regards!!

Article Global Search Regression: A New Automatic Model-selection Te...

Dear Demian, very nice article.

In fact, the theoretical choice is in general the usual paradigm, of course.

but even though I think it is a nice methodological reasoning that you propose. I will test. Thank you.

Excellent point ! Theoretically, some may be true but untrue for one's data, hence testing is also important and necessary.

Selection of static or dynamic panel data method for testing depends upon the DGP and the underlying theory to followed.So, it is better to look into these two important factors.

Excellent point. Isn't knowing the DGP empirical? Doesn't the underlying theory imply empirical also? You 

Dear Arize! I could not understand your points, could you please elaborate in a simple way.

Thanks

Dear Habib: the dgp is understood by doing analysis on the data (empirical). The truth about the validity of a theory is also empirical. In my first note on this issue, I stated that "No it is empirical you may need to experiment on it" Later, you made my point much clearly by tying it to dgp and underlying theory. So I thought your answer was an excellent one.

Hi dear Arize!

Ok Thank you and may be we share more ideas to one another.

Regards,

Habib

Thank you and may be we share more ideas to one another.

Regards,

Caldeira

Thank you and may be we share more ideas to one another.

Regards,

Caldeira

Thank you and may be we share more ideas to one another.

Regards,

Caldeira.

Yes, you can use DOLS and FMDOLS test for the same purpose.

Dynamic testing refers to analyzing code's dynamic behavior in the software. In this type of testing, you have to give input and get output as per the expectation through executing a test case. You can run the test cases manually or through an automation process, and the software code must be compiled and run for this.

Yes, the Hausman test can help determine whether to use a dynamic or static panel data model. If the test indicates that the coefficients of the dynamic model differ significantly from those of the static model, it suggests that the dynamic model may be more appropriate due to the presence of unobserved individual-specific effects.

Yes, the Hausman test is commonly used to determine whether to use the dynamic or static panel data model. If the test suggests that the variables are correlated with the individual-specific effects, indicating endogeneity, then the dynamic model (such as the fixed effects or random effects model) is preferred over the static model (such as the pooled OLS model).

Yes! When deciding between a static and a dynamic panel data model, the key issue is whether past values of the dependent variable influence the current outcome. Several tests can help determine if a dynamic specification is needed: