On the Normalisation of Structural Equations: Properties of Direction Estimators

Grant H. Hillier

No 266950, Department of Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: In the classical structural equation model only the direction of the vector of coefficients of the endogenous variables is determined. The traditional normalisation rule defines the coefficients that are of interest but should not be embodied in on the estimation procedure: we show that the properties of the traditionally defined Ordinary Least Squares and Two Stage Least Squares estimators are distorted by their dependence on the normalisation rule. Properly normalised analogues of these estimators are defined and are shown to have essentially similar properties to those of the Limited Information Maximum Likelihood estimator.

Keywords: Research; Methods/Statistical; Methods (search for similar items in EconPapers)
Pages: 33
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Persistent link: https://EconPapers.repec.org/RePEc:ags:monebs:266950

DOI: 10.22004/ag.econ.266950

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