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Restriction Testing in Binary Choice Model with I(1) Regressors

Author

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  • Wojciech Grabowski

    (University of Lodz)

Abstract

This paper deals with the problem of nonstationarity of regressors in binary choice model. The limit distribution of the ML-estimator is mixed normal, but restriction testing shall not be based on standard t-statistic. The results of the conducted Monte Carlo experiment demonstrate that the true size of the restriction test is far from the significance level. Therefore, the t -Student statistic should be modified and this paper proposes its modification. The results of the Monte Carlo investigation point to the superiority of the new statistic.

Suggested Citation

  • Wojciech Grabowski, 2009. "Restriction Testing in Binary Choice Model with I(1) Regressors," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 1(4), pages 301-309, December.
  • Handle: RePEc:psc:journl:v:1:y:2009:i:4:p:301-309
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    Cited by:

    1. Aleksandra Halka, 2016. "How the central bank’s reaction function in small open economies evolved during the crisis," Bank i Kredyt, Narodowy Bank Polski, vol. 47(4), pages 301-318.
    2. Wickes, Ron, 2021. "Trade deficits and trade conflict: The United States and Japan," Japan and the World Economy, Elsevier, vol. 60(C).

    More about this item

    Keywords

    nonstationarity; maximum likelihood; restriction testing;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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