Comparisons of the alternative biased estimators for the distributed lag models

ABSTRACT

The finite distributed lag models include highly correlated variables as well as lagged and unlagged values of the same variables. Some problems are faced for this model when applying the ordinary least squares (OLS) method or econometric models such as Almon and Koyck models. The primary aim of this study is to compare performances of alternative estimators to the OLS estimator defined by combining the Almon estimator with some estimators using Almon (1965) data. A simulation study with different model parameters is performed and the estimators are compared according to the root mean square error (RMSE) and prediction mean square error (PMSE).

KEYWORDS:

• Almon estimator
• Finite distributed lag model
• Liu estimator
• Ridge estimator

MATHEMATICS SUBJECT CLASSIFICATION:

• Primary 62J05
• 62J07
• Secondary 62P20