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Computing median unbiased estimates in macroeconometric models
Author(s) -
Fair Ray C.
Publication year - 1996
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/(sici)1099-1255(199607)11:4<431::aid-jae396>3.0.co;2-x
Subject(s) - econometrics , mathematics , multiplier (economics) , statistics , term (time) , economics , physics , quantum mechanics , macroeconomics
A stochastic simulation procedure is proposed in this paper for obtaining median unbiased (MU) estimates in macroeconometric models. MU estimates are computed for lagged dependent variable (LDV) coefficients in 18 equations of a macroeconometric model. The 2SLS bias for a coefficient, defined as the difference between the 2SLS estimate and the MU estimate, is on average smaller in absolute value than would be expected from Andrews exact results for an equation with only a constant term, time trend, and LDV. The results also show that in a practical sense the estimated biases are not very large because they have little effect on the overall predictive accuracy of the model and on its multiplier properties.