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

Kenneth West () and David Wilcox

Journal of Business & Economic Statistics, 1996, vol. 14, issue 3, 281-93

Abstract: Using a dynamic linear equation that has a conditionally homoskedastic moving average disturbance, the authors 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)). They 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.

Date: 1996
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Related works:
Working Paper: A Comparison of Alternative Instruments Variables Estimators of a Dynamic Linear Model (1995)
Working Paper: A Comparison of Alternative Instrumental Variables Estimators of Dynamic Linear Model (1994)
Working Paper: A Comparison of Alternative Instrumental Variables Estimators of Dynamic Linear Model (1994)
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