NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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

Kenneth D. West, David W. Wilcox

NBER Technical Working Paper No. 176
Issued in March 1995
NBER Program(s):   EFG

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.

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Document Object Identifier (DOI): 10.3386/t0176

Published: West, Kenneth D. and David W. Wilcox. "A Comparison Of Alternative Instrumental Variables Estimators Of A Dynamic Linear Model," Journal of Business and Economic Statistics, 1996, v14(3,Jul), 281-293.

 
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