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Constrained Emm And Indirect Inference Estimation

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  • Gabriele Fiorentini

    ()
    (Universidad de Alicante)

  • Enrique Sentana

    (CEMFI)

  • Giorgio Calzolari

    (University of Florence)

Abstract

We develop generalised indirect inference procedures that handle equality and inequality constraints on the auxiliary model parameters. We obtain expressions for the optimal weighting matrices, and discuss as examples an MA(1) estimated as AR(1), an AR(1) estimated as MA(1), and a log-normal stochastic volatility process estimated as a GARCH(1,1) with Gaussian or t distributed errors. In the first example, the constraints have no effect, while in the second, they allow us to achieve full efficiency. As for the third, neither procedure systematically outperforms the other, but equality restricted estimators are better when the additional parameter is poorly estimated.

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Bibliographic Info

Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2000-26.

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Length: 65 pages
Date of creation: Nov 2000
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Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2000-26

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  1. Kim, Sangjoon & Shephard, Neil & Chib, Siddhartha, 1998. "Stochastic Volatility: Likelihood Inference and Comparison with ARCH Models," Review of Economic Studies, Wiley Blackwell, vol. 65(3), pages 361-93, July.
  2. Smith, A A, Jr, 1993. "Estimating Nonlinear Time-Series Models Using Simulated Vector Autoregressions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(S), pages S63-84, Suppl. De.
  3. Gourieroux Christian & Monfort Alain & Trognon A, 1981. "Pseudo maximum likelihood methods : theory," CEPREMAP Working Papers (Couverture Orange) 8129, CEPREMAP.
  4. Gourieroux, Christian & Holly, Alberto & Monfort, Alain, 1982. "Likelihood Ratio Test, Wald Test, and Kuhn-Tucker Test in Linear Models with Inequality Constraints on the Regression Parameters," Econometrica, Econometric Society, vol. 50(1), pages 63-80, January.
  5. Gourieroux, C. & Monfort, A. & Renault, E., 1992. "Indirect Inference," Papers 92.279, Toulouse - GREMAQ.
  6. repec:cup:etheor:v:12:y:1996:i:4:p:657-81 is not listed on IDEAS
  7. Gallant, A. Ronald & Tauchen, George, 1996. "Which Moments to Match?," Econometric Theory, Cambridge University Press, vol. 12(04), pages 657-681, October.
  8. Donald W. K. Andrews, 1999. "Estimation When a Parameter Is on a Boundary," Econometrica, Econometric Society, vol. 67(6), pages 1341-1384, November.
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Cited by:
  1. Josep Pijoan-Mas, 2006. "Precautionary Savings or Working Longer Hours?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(2), pages 326-352, April.
  2. Carmen Broto & Esther Ruiz, 2004. "Estimation methods for stochastic volatility models: a survey," Journal of Economic Surveys, Wiley Blackwell, vol. 18(5), pages 613-649, December.

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