A Comparison of Alternative Instruments Variables Estimators of a Dynamic Linear Model

Download or read book A Comparison of Alternative Instruments Variables Estimators of a Dynamic Linear Model written by Kenneth D. West and published by . This book was released on 1995 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a dynamic linear equation that has a conditionally homoskedastic moving average disturbance, we compare two parameterizations of a commonly used instrumental variables estimator (Hansen (1982)) to one that is asymptotically optimal in a class of estimators that includes the conventional one (Hansen (1985)). We find that for some plausible data generating processes, the optimal one is distinctly more efficient asymptotically. Simulations indicate that in samples of size typically available, asymptotic theory describes the distribution of the parameter estimates reasonably well, but that test statistics sometimes are poorly sized.