Improvement of the Liu‐type Shiller estimator for distributed lag models

Nimet Özbay and Selahattin Kaçıranlar

Journal of Forecasting, 2017, vol. 36, issue 7, 776-783

Abstract: The problem of multicollinearity produces undesirable effects on ordinary least squares (OLS), Almon and Shiller estimators for distributed lag models. Therefore, we introduce a Liu‐type Shiller estimator to deal with multicollinearity for distributed lag models. Moreover, we theoretically compare the predictive performance of the Liu‐type Shiller estimator with OLS and the Shiller estimators by the prediction mean square error criterion under the target function. Furthermore, an extensive Monte Carlo simulation study is carried out to evaluate the predictive performance of the Liu‐type Shiller estimator.

Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jforec:v:36:y:2017:i:7:p:776-783

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