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Estimation and testing of time‐varying coefficient regression models in the presence of linear restrictions
Author(s) -
Leybourne S. J.
Publication year - 1993
Publication title -
journal of forecasting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.543
H-Index - 59
eISSN - 1099-131X
pISSN - 0277-6693
DOI - 10.1002/for.3980120105
Subject(s) - lagrange multiplier , linear regression , mathematics , linear model , random walk , homogeneity (statistics) , proper linear model , statistics , log linear model , regression analysis , econometrics , mathematical optimization , bayesian multivariate linear regression
A linear regression model with random walk coefficients is extended to allow for linear restrictions between the coefficients to be satisfied at each point in time. Estimation in this model is shown to be no more involved than estimation in the standard model. It is also demonstrated how, after a slight modification to the testing problem, classical test procedures may be applied to the problem of testing for such restrictions. The performance of the Lagrange Multiplier test for a variety of different restrictions is then investigated via simulation. An empirical application involving testing for homogeneity in a random walk coefficient version of the AIDS model is given.