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Seemingly unrelated regression with measurement error: estimation via Markov Chain Monte Carlo and mean field variational Bayes approximation

Author

Listed:
  • Bresson Georges

    (Department of Economics, Université Paris II, Paris, France)

  • Chaturvedi Anoop

    (Department of Statistics, University of Allahabad, Allahabad, India)

  • Rahman Mohammad Arshad

    (Department of Economic Sciences, Indian Institute of Technology, Kanpur, India)

  • Shalabh

    (Department of Mathematics and Statistics, Indian Institute of Technology, Kanpur, India)

Abstract

Linear regression with measurement error in the covariates is a heavily studied topic, however, the statistics/econometrics literature is almost silent to estimating a multi-equation model with measurement error. This paper considers a seemingly unrelated regression model with measurement error in the covariates and introduces two novel estimation methods: a pure Bayesian algorithm (based on Markov chain Monte Carlo techniques) and its mean field variational Bayes (MFVB) approximation. The MFVB method has the added advantage of being computationally fast and can handle big data. An issue pertinent to measurement error models is parameter identification, and this is resolved by employing a prior distribution on the measurement error variance. The methods are shown to perform well in multiple simulation studies, where we analyze the impact on posterior estimates for different values of reliability ratio or variance of the true unobserved quantity used in the data generating process. The paper further implements the proposed algorithms in an application drawn from the health literature and shows that modeling measurement error in the data can improve model fitting.

Suggested Citation

  • Bresson Georges & Chaturvedi Anoop & Rahman Mohammad Arshad & Shalabh, 2021. "Seemingly unrelated regression with measurement error: estimation via Markov Chain Monte Carlo and mean field variational Bayes approximation," The International Journal of Biostatistics, De Gruyter, vol. 17(1), pages 75-97, May.
    • Handle: RePEc:bpj:ijbist:v:17:y:2021:i:1:p:75-97:n:1
    DOI: 10.1515/ijb-2019-0120
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    References listed on IDEAS

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