Efficient Estimation of a Dynamic Error-Shock Model

26 Pages Posted: 12 Apr 2004 Last revised: 8 Dec 2021

See all articles by Cheng Hsiao

Cheng Hsiao

University of Southern California - Department of Economics; National Taiwan University; National Bureau of Economic Research (NBER)

Peter M. Robinson

London School of Economics & Political Science (LSE) - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: November 1976

Abstract

This paper is concerned with the estimation of the parameters in a dynamic simultaneous equation model with stationary disturbances under the assumption that the variables are subject to random measurement errors. The conditions under which the parameters are identified are stated. An asymptotically efficient frequency-domain class of instrumental variables estimators is suggested. The procedure consists of two basic steps. The first step transforms the model in such a way that the observed exogenous variables are asymptotically orthogonal to the residual terms. The second step involves an iterative procedure like that of Robinson [13].

Suggested Citation

Hsiao, Cheng and Robinson, Peter M., Efficient Estimation of a Dynamic Error-Shock Model (November 1976). NBER Working Paper No. w0157, Available at SSRN: https://ssrn.com/abstract=260345

Cheng Hsiao (Contact Author)

University of Southern California - Department of Economics ( email )

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National Taiwan University

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Peter M. Robinson

London School of Economics & Political Science (LSE) - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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