Random Walks with Drifts, Simulaneous Equation Errors, and Small Samples - Simulating the Bird's Eye View

Horst Entorf

Econometrics from University Library of Munich, Germany

Abstract: The paper illustrates finite sample problems of regression models with I(1) variables. The importance of drifts on test statistics is analysed both analytically and by simulation methods. Moreover, Haavelmo's famous example for the presence of some simultaneous equation bias is considered in the superconsistent case of cointegrated variables. It is shown that TSLS still leads to some improvement even in the case of cointegration when short times series are considered. A main purpose of the paper was to give a graphical exposition of finite sample problems. Most of the results are summarized by use of three-dimensional density functions.

Keywords: Spurious Regressions; Panel Econometrics; Fixed-Effect Modelling; Superconsistency; Monte Carlo (search for similar items in EconPapers)
JEL-codes: C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2004-01-30
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-rmg
Note: Type of Document - pdf; pages: 50. Discussion paper version (PDF file) of "Random walks with drifts: Nonsense regressions and spurious fixed-effect estimation, Journal of Econometrics 80 (1997), 287-296"
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpem:0401009

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