Limit theorems for network dependent random variables

Published in Journal of Econometrics, 2021

Kojevnikov, D., Marmer, V., & Song, K. (2021). “Limit theorems for network dependent random variables.” Journal of Econometrics, 222, 882-908.


This paper is concerned with cross-sectional dependence arising because observations are interconnected through an observed network. Following (Doukhan and Louhichi, 1999), we measure the strength of dependence by covariances of nonlinearly transformed variables. We provide a law of large numbers and central limit theorem for network dependent variables. We also provide a method of calculating standard errors robust to general forms of network dependence. For that purpose, we rely on a network heteroskedasticity and autocorrelation consistent (HAC) variance estimator, and show its consistency. The results rely on conditions characterized by tradeoffs between the rate of decay of dependence across a network and network’s denseness. Our approach can accommodate data generated by network formation models, random fields on graphs, conditional dependency graphs, and large functional-causal systems of equations.