TY  - JOUR
AU  - Stock,James H.
AU  - Watson,Mark W.
TI  - Asymptotically Median Unbiased Estimation of Coefficient Variance in a Time Varying Parameter Model
JF  - National Bureau of Economic Research Technical Working Paper Series
VL  - No. 201
PY  - 1996
Y2  - August 1996
UR  - http://www.nber.org/papers/t0201
L1  - http://www.nber.org/papers/t0201.pdf
N1  - Author contact info:
James H. Stock
Department of Economics
Harvard University
Littauer Center M27
Cambridge, MA 02138
Tel: 617/496-0502
Fax: 617/495-7730
E-Mail: James_Stock@harvard.edu

Mark W. Watson
Department of Economics
Princeton University
Princeton, NJ 08544-1013
Tel: 609/258-4811
Fax: 609/258-5533
E-Mail: mwatson@princeton.edu
AB  - This paper considers the estimation of the variance of coefficients in time varying parameter models with stationary regressors.  The maximum likelihood estimator has large point mass at zero.  We therefore develop asymptotically median unbiased estimators and confidence intervals by inverting median functions of regression-based parameter stability test statistics, computed under the constant-parameter null.  These estimators have good asymptotic relative efficiencies for small to moderate amounts of parameter variability.  We apply these results to an unobserved components model of trend growth in postwar U.S.  GDP:  the MLE implies that there has been no change in the trend rate, while the upper range of the median-unbiased point estimates imply that the annual trend growth rate has fallen by 0.7 percentage points over the postwar period.
ER  -