Computing median unbiased estimates in macroeconometric models

✍ Scribed by Ray C. Fair

• Publisher: John Wiley and Sons
• Year: 1996
• Tongue: English
• Weight: 388 KB
• Volume: 11
• Category: Article
• ISSN: 0883-7252
• DOI: 10.1002/(sici)1099-1255(199607)11:4<431::aid-jae396>3.0.co;2-x

✦ Synopsis

A stochastic simulation procedure is proposed in this paper for obtaining median unbiased (MU) estimates in macroeconometric models. MU estimates are computed for lagged dependent variable (LDV) coefficients in 18 equations of a macroeconometric model. The 2SLS bias for a coefficient, defined as the difference between the 2SLS estimate and the MU estimate, is on average smaller in absolute value than would be expected from Andrews' exact results for an equation with only a constant term, time trend, and LDV. The results also show that in a practical sense the estimated biases are not very large because they have little effect on the overall predictive accuracy of the model and on its multiplier properties. 'See, for example, , Grubb and Symons (1987). . Grubb and Symons (1987) also considered the case of exogenous variables other than the time trend in the equation.