When are two step estimators efficient?

Michael McAleer, C. R. McKenzie

Research output: Contribution to journalArticle

35 Citations (Scopus)

Abstract

Kruskal’s theorem is used to provide simple and elegant alternative derivations of the efficiency of some two step estimators (2SE) for models containing anticipated and unanticipated variables. Several new results are established: 2SE is not efficient for a structural equation with current and lagged values of both anticipated and unanticipated variables; 2SE is always efficient for the parameter associated with the current unanticipated variable, and for the parameter associated with the lagged unanticipated variable if there is no lagged dependent variable in the expectations equation; the inclusion of additional regressors in the structural equation and contemporaneous correlation of the structural and expectations errors can both be analysed in a straightforward manner; the single-equation generalized least squares estimator can be as efficient as the systems maximum likelihood estimator.

Original languageEnglish
Pages (from-to)235-252
Number of pages18
JournalEconometric Reviews
Volume10
Issue number2
DOIs
Publication statusPublished - 1991 Jan 1
Externally publishedYes

Keywords

  • Kruskal's theorem
  • generated regressors
  • rational expectations models
  • two step estimation

ASJC Scopus subject areas

  • Economics and Econometrics

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