Two-Step and Related Estimators in Contemporary Rational-Expectations Models

An Analysis of Small-Sample Properties

Bibliographic Data

ID19419794
AuthorsDennis L Hoffman (Arizona State University, corresponding author)
Year1991
Volume9
Issue1
Pages51-61
Publication date1991-01-01
Open AccessNo
TypeARTICLE
VenueJournal of Business and Economic Statistics (JOURNAL)
Journal identifiersISSN: 0735-0015 • E-ISSN: 1537-2707
PublisherInforma UK Limited (PUBLISHER • GB)
DOI10.1080/07350015.1991.10509826
OpenAlexW1980755224
LanguageEN
References cited14

This article examine the performance of ordinary least squares, generalized least squares, and Pagan's (1986) double-length estimator (DLE) in several rational-expectations models The three approaches are equivalent in the simplest of models but may differ appreciably in models typically encountered in applied work. Small-sample properties of the estimators are examined in several contemporary macroeconomic models. The following conclusions are reached: (1) All estimators exhibit similar sampling distributions in a monetary-neutrality framework, (2) the least squares procuders maintain smaller sampling variance and deliver more reliable tests in a permanent-income model in very small samples, (3) DLE generally delivers superior performance in a nonlinear aggregate-supply model with unanticipated "shock" regressors, and (4) overall, DLE outperforms the LS alternatives except in the smallest of samples

Econometrics · Economics · Estimator · Rational expectations · Statistics · Complex Systems and Time Series Analysis · Financial Risk and Volatility Modeling · Mathematics · Monetary Policy and Economic Impact

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