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Why Are Long-run Parameter Estimates So Disparate?

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  • Bewley, Ronald
  • Fiebig, Denzil G

Abstract

The specification of dynamic models typically leads to the estimation of impact responses. A transformation that allows for the direct estimation of the implied long-run parameters is discussed and the problem of choosing an appropriate estimator is addressed. Because the standard estimators of long-run responses involve ratios of regression coefficients, they typically do not possess finite sample moments. We argue that this existence of moments problem is fundamental to the observed disparity of long-run estimates. Simulation experiments are used to evaluate the properties of the standard implied estimator and a minimum expected loss estimator. Copyright 1990 by MIT Press.

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Bibliographic Info

Article provided by MIT Press in its journal Review of Economics & Statistics.

Volume (Year): 72 (1990)
Issue (Month): 2 (May)
Pages: 345-49

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Handle: RePEc:tpr:restat:v:72:y:1990:i:2:p:345-49

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Cited by:
  1. Shen, Edward Z. & Perloff, Jeffrey M., 2001. "Maximum entropy and Bayesian approaches to the ratio problem," Journal of Econometrics, Elsevier, Elsevier, vol. 104(2), pages 289-313, September.
  2. Kenneth W Clements & Yihui Lan, 2006. "A New Approach to Forecasting Exchange Rates," Economics Discussion / Working Papers, The University of Western Australia, Department of Economics 06-29, The University of Western Australia, Department of Economics.
  3. Paul Gatward & Ian G. Sharpe, 1996. "Capital Structure Dynamics with Interrelated Adjustment: Australian Evidence," Australian Journal of Management, Australian School of Business, Australian School of Business, vol. 21(2), pages 89-112, December.
  4. T. Kesavan & Zuhair A. Hassan & Helen H. Jensen & Stanley R. Johnson, 1993. "Dynamics and Long-run Structure in U.S. Meat Demand," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 41(2), pages 139-153, 07.
  5. Bewley, Ronald & Fiebig, Denzil G., 1992. "Estimation of long-run responses in dynamic models with integrated data," Mathematics and Computers in Simulation (MATCOM), Elsevier, Elsevier, vol. 33(5), pages 539-544.
  6. Diebold & Lamb, . "Why Are Estimates of Agricultural Supply Response So Variable?," Home Pages, University of Pennsylvania _055, University of Pennsylvania.
  7. Kenneth W. Clements & Yihui Lan & Xueyan Zhao, 2005. "The Demand for Vice: Inter-Commodity Interactions with Uncertainty," Economics Discussion / Working Papers, The University of Western Australia, Department of Economics 05-30, The University of Western Australia, Department of Economics.
  8. Kenneth Clements & Yihui Lan, 2007. "Exchange rates, productivity, poverty and inequality," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 39(4), pages 471-476.
  9. Jae H Kim & Iain Fraser & Rob J. Hyndman, 2010. "Improved Interval Estimation of Long Run Response from a Dynamic Linear Model: A Highest Density Region Approach," Working Papers, School of Economics, La Trobe University 2010.06, School of Economics, La Trobe University.
  10. Yihui Lan, 2001. "The Long-Run Value of Currencies: A Big Mac Perspective," Economics Discussion / Working Papers, The University of Western Australia, Department of Economics 01-17, The University of Western Australia, Department of Economics.
  11. Arize, Augustine C. & Osang, Thomas & Slottje, Daniel J., 2008. "Exchange-rate volatility in Latin America and its impact on foreign trade," International Review of Economics & Finance, Elsevier, Elsevier, vol. 17(1), pages 33-44.
  12. Yihui Lan, 2003. "The Long-Term Behaviour of Exchange Rates, Part II: Aspects of Exchange-Rate Economics," Economics Discussion / Working Papers, The University of Western Australia, Department of Economics 03-06, The University of Western Australia, Department of Economics.
  13. Kesavan, T. & Aradhyula, Satheesh V. & Johnson, Stanley R., 1992. "Dynamics And Price Volatility In Farm-Retail Livestock Price Relationships," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, Western Agricultural Economics Association, vol. 17(02), December.

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