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Viewing the Relative Efficiency of IV Estimators in Models with Lagged and Instantaneous Feedbacks

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Author Info

  • Agnes S. Joseph

    ()
    (Faculty of Economics and Econometrics, Universiteit van Amsterdam)

  • Jan F. Kiviet

    ()
    (Faculty of Economics and Econometrics, Universiteit van Amsterdam)

Abstract

This discussion paper led to a publication in 'Computational Statistics & Data Analysis' , 49(2), 417-44. We examine the asymptotic efficiency of OLS and IV estimators in a simple dynamic structural model with a constant and two explanatory variables: the lagged dependent variable and an explanatory variable, which is also autoregressive and may include lagged or instantaneous feedbacks from the dependent variable. The parameter values are such that all variables are stationary. We express the asymptotic efficiency of OLS and various IV estimators via the moments of the data series in the model parameters. Various computational and graphical aids are employed to examine and illustrate the relationships between parameter values, instrument weakness, and estimator efficiency. Symbolic computer algebra and image sequences are used in animations to identify regions in the parameter space where consistent IV estimators may be less efficient than inconsistent OLS estimators, upon comparing the asymptotic approximation to their mean squared errors.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 04-056/4.

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Date of creation: 27 May 2004
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Handle: RePEc:dgr:uvatin:20040056

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Web page: http://www.tinbergen.nl

Related research

Keywords: asymptotic efficiency comparisons; computational visualization; dynamic simultaneous models; instrument weakness;

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References

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Citations

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Cited by:
  1. Jan F. KIVIET & Jerzy NIEMCZYK, 2013. "On the limiting and empirical distributions of IV estimators when some of the instruments are actually endogenous," Economic Growth centre Working Paper Series 1311, Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre.
  2. Jan F. Kiviet & Jerzy Niemczyk, 2006. "The Asymptotic and Finite Sample Distributions of OLS and Simple IV in Simultaneous Equations," Tinbergen Institute Discussion Papers 06-078/4, Tinbergen Institute.
  3. Dufour, Jean-Marie & Khalaf, Lynda & Kichian, Maral, 2010. "Estimation uncertainty in structural inflation models with real wage rigidities," Computational Statistics & Data Analysis, Elsevier, vol. 54(11), pages 2554-2561, November.
  4. Jean-Marie Dufour & Lynda Khalaf & Maral Kichian, 2009. "Structural Inflation Models with Real Wage Rigidities: The Case of Canada," Working Papers 09-21, Bank of Canada.
  5. Jan F. Kiviet & Jerzy Niemczyk, 2006. "The Asymptotic and Finite Sample Distributions of OLS and Simple IV in Simultaneous Equations," Tinbergen Institute Discussion Papers 06-078/4, Tinbergen Institute.
  6. Bolduc, Denis & Khalaf, Lynda & Moyneur, √Črick, 2008. "Identification-robust simulation-based inference in joint discrete/continuous models for energy markets," Computational Statistics & Data Analysis, Elsevier, vol. 52(6), pages 3148-3161, February.
  7. Beaulieu, Marie-Claude & Dufour, Jean-Marie & Khalaf, Lynda, 2009. "Finite sample multivariate tests of asset pricing models with coskewness," Computational Statistics & Data Analysis, Elsevier, vol. 53(6), pages 2008-2021, April.
  8. Kiviet, Jan F. & Niemczyk, Jerzy, 2012. "Comparing the asymptotic and empirical (un)conditional distributions of OLS and IV in a linear static simultaneous equation," Computational Statistics & Data Analysis, Elsevier, vol. 56(11), pages 3567-3586.
  9. Dufour, Jean-Marie & Khalaf, Lynda & Kichian, Maral, 2010. "On the precision of Calvo parameter estimates in structural NKPC models," Journal of Economic Dynamics and Control, Elsevier, vol. 34(9), pages 1582-1595, September.

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