Reparameterization and Estimation in Unit Root Equations
Reparameterization is common in econometrics with early examples in the form of Koyck transformations that started in the 1950s. Reparameterization can produce interesting models for estimation and inference. The paper specifically looks at reparameterization in unit root equations, and provides some results of OLS and improved estimation for comparative purposes. Surprisingly, the dominance of the positive Stein-rule and 2SHI estimators over the OLS uniformly holds in the level case, and more so in the difference case. The implication is that, for estimation of unit root equations, the OLS is suboptimal.
|Date of creation:||01 Mar 1993|
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