Some Evidence on Finite Sample Behavior of an Instrumental Variables Estimator of the Linear Quadtratic Inventory Model

37 Pages Posted: 4 Jul 2004

See all articles by Kenneth D. West

Kenneth D. West

University of Wisconsin - Madison - Department of Economics; National Bureau of Economic Research (NBER)

David W. Wilcox

Federal Reserve Board - Division of Research and Statistics

Date Written: July 1993

Abstract

We evaluate some aspects of the finite sample distribution of an instrumental variables estimator of a first order condition of the Holt et al. (1960) linear quadratic inventory model. We find that for some but not all empirically relevant data generating processes and sample sizes, asymptotic theory predicts a wide dispersion of parameter estimates, with a substantial finite sample probability of estimates with incorrect signs. For such data generating processes, simulation evidence suggests that different choices of left hand side variables often produce parameter estimates of an opposite sign. More generally, while the asymptotic theory often provides a good approximation to the finite sample distribution, sometimes it does not

Suggested Citation

West, Kenneth D. and Wilcox, David W., Some Evidence on Finite Sample Behavior of an Instrumental Variables Estimator of the Linear Quadtratic Inventory Model (July 1993). NBER Working Paper No. t0139. Available at SSRN: https://ssrn.com/abstract=305523

Kenneth D. West (Contact Author)

University of Wisconsin - Madison - Department of Economics ( email )

1180 Observatory Drive
Madison, WI 53706
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608-262-0033 (Phone)
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National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
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David W. Wilcox

Federal Reserve Board - Division of Research and Statistics ( email )

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Mailstop 153
Washington, DC 20551
United States

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