Estimation of the probit model with autocorrelated errors via the MCECM algorithm

Shang-Wu Yu and Shang-Wu Yu

Applied Economics Letters, 1999, vol. 6, issue 7, 409-412

Abstract: Estimation of the probit model with autocorrelated errors often involves the calculation of a multiple integral which is usually intractable. A stochastic version of the EM algorithm is proposed to solve the problem. The approach implements the E-step by retrieving the latent values via a Monte Carlo method (MCE-step) and replaces the M-step by a sequence of conditional maximizations (CM-step). The practicality of this MCECM algorithm is illustrated by estimating the reaction function of the monetary policy in Taiwan by a probit model with first-order serial correlation.

Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:6:y:1999:i:7:p:409-412

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DOI: 10.1080/135048599352907

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