Bayesian Estimation for Partially Linear Models with an Application to Household Gasoline Consumption

Haotian Chen () and Xibin Zhang ()

No 28/14, Monash Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: A partially linear model is often estimated in a two-stage procedure, which involves estimating the nonlinear component conditional on initially estimated linear coefficients. We propose a sampling procedure that aims to simultaneously estimate the linear coefficients and bandwidths involved in the Nadaraya-Watson estimator of the nonlinear component. The performance of this sampling procedure is demonstrated through Monte Carlo simulation studies. The proposed sampling algorithm is applied to partially linear models of gasoline consumption based on the US household survey data. In contrary to implausible price effect reported in the literature, we find negative price effect on household gasoline consumption.

Keywords: backfitting least squares; bandwidth; household income; price elasticity; profile least squares; random-walk Metropolis (search for similar items in EconPapers)
JEL-codes: C11 C13 C14 Q41 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-ecm, nep-ene and nep-ore
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