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Seemingly Unrelated Regression with Measurement Error: Estimation via Markov chain Monte Carlo and Mean Field Variational Bayes Approximation


  • Georges Bresson
  • Anoop Chaturvedi
  • Mohammad Arshad Rahman
  • Shalabh


Linear regression with measurement error in the covariates is a heavily studied topic, however, the statistics/econometrics literature is almost silent to estimating a multi-equation model with measurement error. This paper considers a seemingly unrelated regression model with measurement error in the covariates and introduces two novel estimation methods: a pure Bayesian algorithm (based on Markov chain Monte Carlo techniques) and its mean field variational Bayes (MFVB) approximation. The MFVB method has the added advantage of being computationally fast and can handle big data. An issue pertinent to measurement error models is parameter identification, and this is resolved by employing a prior distribution on the measurement error variance. The methods are shown to perform well in multiple simulation studies, where we analyze the impact on posterior estimates arising due to different values of reliability ratio or variance of the true unobserved quantity used in the data generating process. The paper further implements the proposed algorithms in an application drawn from the health literature and shows that modeling measurement error in the data can improve model fitting.

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  • Georges Bresson & Anoop Chaturvedi & Mohammad Arshad Rahman & Shalabh, 2020. "Seemingly Unrelated Regression with Measurement Error: Estimation via Markov chain Monte Carlo and Mean Field Variational Bayes Approximation," Papers 2006.07074,
  • Handle: RePEc:arx:papers:2006.07074

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    References listed on IDEAS

    1. W.E. Griffiths & Ma. Rebecca Valenzuela, 2004. "Gibbs Samplers for a Set of Seemingly Unrelated Regressions," Department of Economics - Working Papers Series 912, The University of Melbourne.
    2. Raymond J. Carroll & Douglas Midthune & Laurence S. Freedman & Victor Kipnis, 2006. "Seemingly Unrelated Measurement Error Models, with Application to Nutritional Epidemiology," Biometrics, The International Biometric Society, vol. 62(1), pages 75-84, March.
    3. Griffiths, William E & Chotikapanich, Duangkamon, 1997. "Bayesian Methodology for Imposing Inequality Constraints on a Linear Expenditure System with Demographic Factors," Australian Economic Papers, Wiley Blackwell, vol. 36(69), pages 321-341, December.
    4. Zellner, Arnold & Ando, Tomohiro, 2010. "A direct Monte Carlo approach for Bayesian analysis of the seemingly unrelated regression model," Journal of Econometrics, Elsevier, vol. 159(1), pages 33-45, November.
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