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The Accuracy of the Higher Order Bias Approximation for the 2SLS Estimator

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Author Info

  • Hadri, K.
  • Phillips, G.D.A.

Abstract

Mikhail (1972a) found that estimated 2SLS biases, obtained through simulation using antithetic variables and control variate methods, were closer to each other than to Nagar's bias approximation to order T-1. As remarked by Kiviet and Phillips (1996), this result represents one of a very small number of higher order approximations in the econometric literature yet there is no published evidence of its accuracy. In this paper the accuracy of the approximation is explored in the context of a framework similar to that chosen by Mikhail (1972a) and it is found that the higher order approximation is clearly superior. In cases where the bias is severe, the results support the belief that, when the first order approximation is poor but not terrible, the higher order approximation mops up most of the error.

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Bibliographic Info

Paper provided by Exeter University, Department of Economics in its series Discussion Papers with number 9906.

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Length: 16 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:exe:wpaper:9906

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Web page: http://business-school.exeter.ac.uk/about/departments/economics/
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Related research

Keywords: TIME SERIES ; STATISTICAL ANALYSIS ; ECONOMETRICS;

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References

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  1. Kinal, Terrence W, 1980. "The Existence of Moments of k-Class Estimators," Econometrica, Econometric Society, vol. 48(1), pages 241-49, January.
  2. Sawa, Takamitsu, 1972. "Finite-Sample Properties of the k-Class Estimators," Econometrica, Econometric Society, vol. 40(4), pages 653-80, July.
  3. Phillips, G. D. A. & Harvey, A. C., 1984. "A note on estimating and testing exogenous variable coefficient estimators in simultaneous equation models," Economics Letters, Elsevier, vol. 15(3-4), pages 301-307.
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Cited by:
  1. Kaddour Hadri & Yao Rao, 2006. "Panel Stationarity Test with Structural Breaks," Research Papers 200615, University of Liverpool Management School.
  2. Badi Baltagi & Seuck Heun Song & Byoung Cheol Jung, 2002. "Simple Lm Tests For The Unbalanced Nested Error Component Regression Model," Econometric Reviews, Taylor & Francis Journals, vol. 21(2), pages 167-187.
  3. Kiviet, J.F. & Phillips, G.D.A., 1999. "Higher-Order Asymptotic Expansions of the Least-Squares Estimation Bias in First-Order Dynamic Regression Models," Discussion Papers 9903, Exeter University, Department of Economics.

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