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

  • Wojciech Grabowski

    ()

    (University of Lodz)

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.

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File URL: http://cejeme.org/publishedarticles/2010-38-27-634105175172500000-4821.pdf
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Article provided by CEJEME in its journal Central European Journal of Economic Modelling and Econometrics.

Volume (Year): 1 (2009)
Issue (Month): 4 (December)
Pages: 301-309

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Handle: RePEc:psc:journl:v:1:y:2009:i:4:p:301-309
Contact details of provider: Web page: http://cejeme.org/

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