Simulation Based Finite- and Large-Sample Inference Methods in Simultaneous Equations
In the context of multivariate regression (MLR) and simultaneous equations (SE), it is well known that commonly employed asymptotic test criteria are seriously biased towards overrejection. In this paper, we propose finite and large sample likelihood based test procedures for possibly nonlinear hypotheses on the coefficients of SE systems. We discuss a number of bounds tests and Monte Carlo simulations based tests. The latter involves maximizing a randomized p -value function over the relevant nuisance parameter space. This is done numerically by using a simulated annealing algorithm. Illustrative Monte Carlo experiments show that (i) bootstrapping standard instrumental variable (IV) based criteria fails to achieve size control, especially (but not exclusively) under near non-identification conditions, and (ii) the tests based on IV estimates do not appear to be boundedly pivotal and so no size-correction may be feasible. By contrast, likelihood ration based tests work well in the experiments performed.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||01 Mar 1999|
|Date of revision:|
|Contact details of provider:|| Postal: CEF99, Boston College, Department of Economics, Chestnut Hill MA 02467 USA|
Web page: http://fmwww.bc.edu/CEF99/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:sce:scecf9:824. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.