Efficient Estimation of Time Series Models with Predetermined, but not Exogenous, Instruments
1980-09
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Efficient Estimation of Time Series Models with Predetermined, but not Exogenous, Instruments
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1980-09
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Center for Economic Research, Department of Economics, University of Minnesota
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Working Paper
Abstract
Particularly in rational expectations models, it can occur that a
model has serially correlated residuals, implies that those residuals are
uncorrelated with contemporaneous and lagged values of a predetermined instrument,
but does not imply that the instruments are strictly exogenous. This paper
proposes a method for transforming such a model to one without serial
correlation, while keeping the instrument predetermined. Standard theory of
instrumental variables estimation then applies. If enough lagged values of
the instrument are used, standard instrumental variables estimators applied
to the transformed model approach the same bound on asymptotic efficiency
which applies to another class of estimators for this problem which have
been proposed by others.
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Previously Published Citation
Hayashi, F. and Sims, C., (1980), "Efficient Estimation of Time Series Models with Predetermined, but not Exogenous, Instruments", Discussion Paper No. 136, Center for Economic Research, Department of Economics, University of Minnesota.
Suggested citation
Sims, Christopher; Hayashi, Fumio. (1980). Efficient Estimation of Time Series Models with Predetermined, but not Exogenous, Instruments. Retrieved from the University Digital Conservancy, https://hdl.handle.net/11299/55041.
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