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Consistent Pseudo‐Maximum Likelihood Estimators and Groups of Transformations

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  • C. Gouriéroux
  • A. Monfort
  • J.‐M. Zakoïan

Abstract

In a transformation model yt=c[a(xt,β),ut], where the errors ut are i.i.d. and independent of the explanatory variables xt, the parameters can be estimated by a pseudo‐maximum likelihood (PML) method, that is, by using a misspecified distribution of the errors, but the PML estimator of β is in general not consistent. We explain in this paper how to nest the initial model in an identified augmented model with more parameters in order to derive consistent PML estimators of appropriate functions of parameter β. The usefulness of the consistency result is illustrated by examples of systems of nonlinear equations, conditionally heteroscedastic models, stochastic volatility, or models with spatial interactions.

Suggested Citation

  • C. Gouriéroux & A. Monfort & J.‐M. Zakoïan, 2019. "Consistent Pseudo‐Maximum Likelihood Estimators and Groups of Transformations," Econometrica, Econometric Society, vol. 87(1), pages 327-345, January.
    • Handle: RePEc:wly:emetrp:v:87:y:2019:i:1:p:327-345
    DOI: 10.3982/ECTA14727
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    Cited by:

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    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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