Asymptotically Median Unbiased Estimation of Coefficient Variance in a Time Varying Parameter Model / James H. Stock, Mark W. Watson.

Format:

Book

Author/Creator:

Stock, James H.

Contributor:

National Bureau of Economic Research.

Watson, Mark W.

Series:

Technical Working Paper Series (National Bureau of Economic Research) no. t0201.

NBER technical working paper series no. t0201

Language:

English

Subjects (All):

Asymptotic distribution (Probability theory).

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1996.

Cambridge, Mass : National Bureau of Economic Research, 1996.

Summary:

This paper considers the estimation of the variance of coefficients in time varying parameter models with stationary regressors. The maximum likelihood estimator has large point mass at zero. We therefore develop asymptotically median unbiased estimators and confidence intervals by inverting median functions of regression-based parameter stability test statistics, computed under the constant-parameter null. These estimators have good asymptotic relative efficiencies for small to moderate amounts of parameter variability. We apply these results to an unobserved components model of trend growth in postwar U.S. GDP: the MLE implies that there has been no change in the trend rate, while the upper range of the median-unbiased point estimates imply that the annual trend growth rate has fallen by 0.7 percentage points over the postwar period.

Notes:

Print version record

August 1996.