38 Pages Posted: 4 Oct 2001
Date Written: July 1983
This paper introduces a limited-information two-step estimator for models with rational expectations and serially correlated disturbances. The estimator greatly extends the area of applicability of McCallum's (1976) instrumental variables approach to rational expectations models. Section I reviews McCallum's method and discusses in detail the problems surrounding its use in many empirical contexts. Section II presents the two-step two-stage least squares estimator (2S2S1) and demonstrates its efficiency relative to that of McCallum (1979). Section III provides a comparison nf several estimators for a two equation macroeconomic model with rational expectations due to Taylor (1979).
Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
Suggested Citation: Suggested Citation
Obstfeld, Maurice and Cumby, Robert E. and Huizinga, John P., Two-Step Two-Stage Least Squares Estimation in Models with Rational Expectations (July 1983). NBER Working Paper Series, Vol. t0011, pp. -, 1983. Available at SSRN: https://ssrn.com/abstract=275351
By Robert Flood