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An efficient monte carlo study of two-step generalized least squares estimators for random-effects panel data models

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Author Info
Elena Casquel () (Universitat Jaume I)
Ezequiel Uriel () (Universitat de Valencia and IVIE)

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Abstract

Using efficient Monte Carlo methods, the performance of two-step Generalized Least Squares (GLS) estimators for the one-way error components models in small samples is analyzed. In our approach, we focus on the two-step GLS estimators provided by the programs LIMDEP, RATS and TSP, which mainly differ in the solution of negative variance components problem. Our main result is that the use of non negative first-step estimators, as RATS, produces a considerably efficiency loss. We greatly improve the efficiency of simulations using a control variate that can be implemented with no virtually computational cost.

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Publisher Info
Article provided by Economics Bulletin in its journal Economics Bulletin.

Volume (Year): 3 (2002)
Issue (Month): 23 ()
Pages: 1-10
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Handle: RePEc:ebl:ecbull:v:3:y:2002:i:23:p:1-10

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Related research
Keywords: control variates.; error components models; panel data; simulations;

Find related papers by JEL classification:
C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General
C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables

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  1. Campos, Julia, 1986. "Finite-sample properties of the instrumental-variables estimator for dynamic simultaneous-equation subsystems with ARMA disturbances," Journal of Econometrics, Elsevier, vol. 32(3), pages 333-366, August. [Downloadable!] (restricted)
  2. Hendry, David F., 1984. "Monte carlo experimentation in econometrics," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 16, pages 937-976 Elsevier. [Downloadable!] (restricted)
  3. Baltagi, Badi H., 1981. "Pooling : An experimental study of alternative testing and estimation procedures in a two-way error component model," Journal of Econometrics, Elsevier, vol. 17(1), pages 21-49, September. [Downloadable!] (restricted)
  4. Taylor, William E., 1980. "Small sample considerations in estimation from panel data," Journal of Econometrics, Elsevier, vol. 13(2), pages 203-223, June. [Downloadable!] (restricted)
  5. Ricardo De Bonis & Giuseppe Bruno, 2000. "A Comparative Study Of Alternative Econometric Packages: An Application To Italian Deposit Interest Rates," Computing in Economics and Finance 2000 160, Society for Computational Economics. [Downloadable!]
  6. Hendry, David F. & Harrison, Robin W., 1974. "Monte Carlo methodology and the small sample behaviour of ordinary and two-stage least squares," Journal of Econometrics, Elsevier, vol. 2(2), pages 151-174, July. [Downloadable!] (restricted)
  7. Swamy, P A V B & Arora, S S, 1972. "The Exact Finite Sample Properties of the Estimators of Coefficients in the Error Components Regression Models," Econometrica, Econometric Society, vol. 40(2), pages 261-75, March. [Downloadable!] (restricted)
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