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The Method Of Simulated Maximum Likelihood For The Estimaton Of Dynamic Ordered Probit: An Application To Country-Risk For Non-Developed Countries

  • González, M.

    ()

  • Minguez, R.

    ()

This paper aims to give a detailed explanation of the econometric methodology necessary to estimate dynamic probit models with ordinal dependent variables. A typology of cases are established which appear when considering different choices of individual heterogeneity along with time correlation. To be able to estimate by maximum likelihood the models which come out of the different alternatives proposed, simulation techniques are used and put into practice by the GHK simulator and, in this way, estimators by simulated maximum likelihood are obtained. Finally, all the models described are used to measure and determine the macroeconomic factors which explain the ratings of country-risk in non-developed countries.

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File URL: http://www.usc.es/economet/reviews/ijaeqs233.pdf
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Article provided by Euro-American Association of Economic Development in its journal International Journal of Applied Econometrics and Quantitative Studies.

Volume (Year): 2 (2005)
Issue (Month): 3 ()
Pages: 99-133

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Handle: RePEc:eaa:ijaeqs:v:2:y2005:i:3_3
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  1. Borsch-Supan, Axel & Hajivassiliou, Vassilis A., 1993. "Smooth unbiased multivariate probability simulators for maximum likelihood estimation of limited dependent variable models," Journal of Econometrics, Elsevier, vol. 58(3), pages 347-368, August.
  2. V A Hajivassiliou & DL McFadden, 1997. "The Method of Simulated Scores for the Estimation of LDV Models," STICERD - Econometrics Paper Series 328, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  3. Axel Borsch-Supan & Vassilis Hajivassiliou & Laurence J. Kotlikoff, 1992. "Health, Children, and Elderly Living Arrangements: A Multiperiod-Multinomial Probit Model with Unobserved Heterogeneity and Autocorrelated Errors," NBER Chapters, in: Topics in the Economics of Aging, pages 79-108 National Bureau of Economic Research, Inc.
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  6. Joachim Inkmann, 1999. "Misspecified heteroskedasticity in the panel probit model: A small sample comparison of GMM and SML estimators," CoFE Discussion Paper 99-04, Center of Finance and Econometrics, University of Konstanz.
  7. Hajivassiliou, Vassilis & McFadden, Daniel & Ruud, Paul, 1996. "Simulation of multivariate normal rectangle probabilities and their derivatives theoretical and computational results," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 85-134.
  8. Hausman, Jerry A. & Lo, Andrew W. & MacKinlay, A. Craig, 1992. "An ordered probit analysis of transaction stock prices," Journal of Financial Economics, Elsevier, vol. 31(3), pages 319-379, June.
  9. Jerry A. Hausman & Andrew W. Lo & Craig A. MacKinlay, . "An Ordered Probit Analysis of Transaction Stock Prices (Reprint 029)," Rodney L. White Center for Financial Research Working Papers 26-91, Wharton School Rodney L. White Center for Financial Research.
  10. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555, November.
  11. John F. Geweke & Michael P. Keane & David E. Runkle, 1994. "Alternative computational approaches to inference in the multinomial probit model," Staff Report 170, Federal Reserve Bank of Minneapolis.
  12. Harvey, Campbell R. & Zhou, Guofu, 1993. "International asset pricing with alternative distributional specifications," Journal of Empirical Finance, Elsevier, vol. 1(1), pages 107-131, June.
  13. Breitung, Jörg & Lechner, Michael, 1998. "Alternative GMM methods for nonlinear panel data models," SFB 373 Discussion Papers 1998,81, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  14. Andrew Berg & Rebecca N. Coke, 2004. "Autocorrelation-Corrected Standard Errors in Panel Probits; An Application to Currency Crisis Prediction," IMF Working Papers 04/39, International Monetary Fund.
  15. Cheung, S., 1996. "Provincial Credit Rating in Canada: An Ordered Probit Analysis," Staff Working Papers 96-6, Bank of Canada.
  16. Lee, Suk Hun, 1993. "Are the credit ratings assigned by bankers based on the willingness of LDC borrowers to repay?," Journal of Development Economics, Elsevier, vol. 40(2), pages 349-359, April.
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