Two-Step Two-Stage Least Squares Estimation in Models with Rational Expectations
This paper introduces a limited-information two-step estimator for models with rational expectations and serially correlated disturbances. The estimator greatly extends the area of applicability of McCallum's (1976) instrumental variables approach to rational expectations models. Section I reviews McCallum%s method and discusses in detail the problems surrounding its use in many empirical c/ntexts. Section II presents the two-step two-stage least squares estimator (2S2S1) and demonstrates its efficiency relative to that of McCallum (1979). Section III provides a comparison nf several estim!tors for a two equation macroeconomic model with rational expectations due to Taylor (1979).
|Date of creation:||Jul 1983|
|Date of revision:|
|Publication status:||published as Cumby, Robert E., John Huizinga and Maurice Obstfeld. "Two-Step Two-Stage Least Squares Estimation in Models with Rational Expectations." Journal of Econometrics, Vol. 21, (1983) pp. 333-355.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
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- Amemiya, Takeshi, 1974. "The nonlinear two-stage least-squares estimator," Journal of Econometrics, Elsevier, vol. 2(2), pages 105-110, July.
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