A note on Measurement Error and Euler Equations: an Alternative to Log-Linear Approximations
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Eva Ventura: UPF
General Economics and Teaching from University Library of Munich, Germany
Empirical research based on panel data has to pay special attention to measurement errors. Utility maximization often yields nonlinear decision rules in which measurement errors enter in a multiplicative way. The usual strategy to deal with them consists of taking log-linear approximations of the equations to estímate. The expression to be estimated then includes a new error component and the estimators could be biased and inconsistent. We describe one particular parameterization that avoids linearizing the equation we want to estimate.
Keywords: Panel; Euler equations; Measurement error; GMM (search for similar items in EconPapers)
JEL-codes: C23 C51 D12 (search for similar items in EconPapers)
Note: Type of Document - pdf; prepared on win2000; to print on Hewlett Packard Laserjet; pages: 7; figures: 0. UPF Working Paper # 31 Newer version published in Economics Letters
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpgt:0312004
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