Susan Orbe () (Departamento de Econometria y Estadistica (Economia Aplicada III), Universidad del Pais Vasco, Spain) Eva Ferreira () (Departamento de Econometria y Estadistica (Economia Aplicada III), Universidad del Pais Vasco, Spain) Juan Rodriguez-Poo () (Departamento de Economia, Universidad de Cantabria, Spain)
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In this paper we propose a new method to estimate nonparametrically a time varying parameter model when some qualitative information from outside data (e.g. seasonality) is available. In this framework we make two main contributions. First, the resulting estimator is shown to belong to the class of generalized ridge estimators and under some conditions its rate of convergence is optimal within its smoothness class. Furthermore, if the outside data information is fullfilled by the underlying model, the estimator shows efficiency gains in small sample sizes. Second, for the implementation process, since the estimation procedure envolves the computation of the inverse of a high order matrix we provide an algorithm that avoids this computation and, also, a data-driven method is derived to select the control parameters. The practical performance of the method is demonstrated in a simulation study and in an application to the demand of soft drinks in Canada.
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Paper provided by Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística) in its series BILTOKI with number
200102.
Order Information: Postal: Dpto. de Econometría y Estadística, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain Email:
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Find related papers by JEL classification: C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Cooley, Thomas F & Prescott, Edward C, 1973.
"An Adaptive Regression Model,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(2), pages 364-71, June.
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