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"Computing Median Unbiased Estimates
in Macroeconometric Models," Journal of
A stochastic simulation procedure is proposed in this paper for
obtaining median unbiased (MU) estimates in macroeconometric models.
MU estimates are computed for lagged dependent variable (LDV)
coefficients in 18 equations of a macroeconometric model. The 2SLS
bias for a coefficient, defined as the difference between the 2SLS
estimate and the MU estimate, is on average smaller in absolute value than
would be expected from Andrews' exact results for an equation with
only a constant term, time trend, and LDV. The results also show
that in a practical sense the estimated biases are not very large because
they have little effect on the overall predictive accuracy of the model
and on its multiplier properties.
This paper discusses how stochastic simulation can be used to
obtain median unbiased estimates in macroeconometric models.
The US model is used for the applications.
The material in Chapter 7, Section 7.4, and Chapter 8, Section 8.3, in
1994#2 is based on this paper.