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Information-theoretic Estimation Of Preference Parameters: Macroeconomic Applications And Simulation Evidence

Author

Listed:
  • Allan Gregory

    (B.A. (Toronto), Ph.D. (Queen's))

  • Jean-Francois Lamarche

    (Brock University)

  • Gregor W. Smith

Abstract

This paper investigates the behaviour of estimators based on the Kullback-Leibler information criterion (KLIC), as an alternative to the generalized method of moments (GMM). We first study the estimators in a Monte Carlo simulation model of consumption growth with power utility. Then we compare KLIC and GMM estimators in macroeconomic applications, in which preference parameters are estimated with aggregate data. KLIC probabilitymeasures serve as useful diagnostics. In dependent data, tests of overidentifying restrictions in the KLIC framework have size properties comparable to those of the J-test initerated GMM, but superior size-adjusted power.

Suggested Citation

  • Allan Gregory & Jean-Francois Lamarche & Gregor W. Smith, 2001. "Information-theoretic Estimation Of Preference Parameters: Macroeconomic Applications And Simulation Evidence," Working Paper 1249, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:1249
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Alain Guay & Jean-Francois Lamarche, 2005. "The Information Content of Implied Probabilities to Detect Structural Change," Working Papers 0804, Brock University, Department of Economics, revised Oct 2008.
    2. Noor, Jawwad, 2009. "Hyperbolic discounting and the standard model: Eliciting discount functions," Journal of Economic Theory, Elsevier, vol. 144(5), pages 2077-2083, September.
    3. Allen, Jason & Gregory, Allan W. & Shimotsu, Katsumi, 2011. "Empirical likelihood block bootstrapping," Journal of Econometrics, Elsevier, vol. 161(2), pages 110-121, April.
    4. Marco Taboga, 2014. "The Riskiness of Corporate Bonds," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(4), pages 693-713, June.
    5. Sowell, Fallaw, 2009. "The empirical saddlepoint likelihood estimator applied to two-step GMM," MPRA Paper 15494, University Library of Munich, Germany, revised May 2009.
    6. Luis Quintero, "undated". "MCMC Approach to Classical Estimation with Overidentifying Restrictions," GSIA Working Papers 2013-E13, Carnegie Mellon University, Tepper School of Business.
    7. Yasutomo Murasawa, 2009. "Do coincident indicators have one-factor structure?," Empirical Economics, Springer, vol. 36(2), pages 339-365, May.
    8. Manuel Dominguez & Ignacio Lobato, 2010. "Consistent Inference in Models Defined by COnditional Moment Restrictions: an Alternative to GMM," Working Papers 1005, Centro de Investigacion Economica, ITAM.

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    More about this item

    Keywords

    KLIC estimation; generalized method of moments; Monte Carlo;
    All these keywords.

    JEL classification:

    • 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
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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