Inference in Partially Identified Heteroskedastic Simultaneous Equations Models

Identification through heteroskedasticity in heteroskedastic simultaneous equations models (HSEMs) is considered. The possibility that heteroskedasticity identifies the structural parameters only partially is explicitly allowed for. The asymptotic properties of the identified parameters are derived. Moreover, tests for identification through heteroskedasticity are developed and their asymptotic distributions are derived. Monte Carlo simulations are used to explore the small sample properties of the asymptotically valid methods. Finally, the approach is applied to investigate the relation between the extent of economic openness and inflation.

Keywords: Heteroskedasticity, Simultaneous Equations Models, Testing for Identification, Davies' Problem

JEL Classification: C30

Suggested Citation: Suggested Citation

Luetkepohl, Helmut and Milunovich, George and Yang, Minxian, Inference in Partially Identified Heteroskedastic Simultaneous Equations Models (December 22, 2016). UNSW Business School Research Paper No. 2016-19, Available at SSRN: https://ssrn.com/abstract=2910098 or http://dx.doi.org/10.2139/ssrn.2910098