 |
English
|
正體中文
|
简体中文
|
Post-Print筆數 : 27 |
Items with full text/Total items : 109948/140897 (78%)
Visitors : 46097276
Online Users : 850
|
|
|
Loading...
|
Please use this identifier to cite or link to this item:
https://nccur.lib.nccu.edu.tw/handle/140.119/74336
|
| Title: | Uncovering Preference Parameters with Higher-Order Consumption Moments |
| Authors: | Kuo, Biing-Shen;Lan, Ching-Yu
郭炳伸 |
| Contributors: | 國貿系 |
| Date: | 2006 |
| Issue Date: | 2015-04-02 11:35:31 (UTC+8) |
| Abstract: | Despite the importance of estimating structural parameters governing consumption dynamics, such as the elasticity of intertemporal substitution, empirical attempts to un- veil these parameters using a log-linearized version of the Euler equation have produced many puzzling results. Some studies show that the approximation bias may well con- stitute a compelling explanation. Even so, the approximation technique continues to be useful and convenient in estimation of the parameters, because noisy cEmpirical attempts using panel data to unveil preference parameters by a log-linearized version of the Euler equation have produced many buzzling results. Recent studies have shown that the approximation bias may be responsible for these anomalies. Motivated by its potential success in reducing the bias, we investigate the economic significance and empirical relevance of higher-order approximations to the Euler equation with simulation method. The approach mounted has the advantages of easy implementation and being less prone to misspecification. Our simulation results clearly reveal that the approximation bias can be significantly reduced when the higher-order moments are introduced, but at the cost of efficiency loss, the conventional tradeoff between bias reduction and efficiency loss. Our study contributes as well to the selection of the approximation order. With the selection criteria proposed in the paper, we find that the mean-squared errors may be substantially reduced simply by adding a small number of the higherorder moments to the second-order approximated consumption regression. Remarkably, when applying our approach to PSID, ‘reasonable’ preference parameter estimates, as suggested in the literature, can now be produced. onsumption data renders a full-edged GMM estimation unreliable. Motivated by its potential success in reducing the bias, we investigate the economic signicance and empirical relevance of higher-order approximations to the Euler equation with simulation methodology. The higher-order approximations suggest a linear relationship between expected consump- tion growth and its higher-order moments. Our simulation results clearly reveal that the approximation bias can be signican tly reduced when the higher-order moments are introduced into estimation, but at the cost of eciency loss. It therefore documents a clear tradeo between approximation bias reduction and eciency loss in the con- sumption growth regression when higher-order approximations to the Euler equation is considered. A question of immediate practical interest arises How many higher-order terms are needed?" The second part of our Monte-Carlo studies then deals with this issue. We judge whether a particular consumption moment should be included in the regression by the criterion of mean squared errors (MSE) that accounts for a trade-o between estimation bias and eciency loss. The included moments leading to smaller MSE are regarded as ones to be needed. We also investigate the usefulness of the model and/or moment selection criteria in providing guidance in selecting the approximation order. We nd that improvements over the second-order approximated Euler equation can always be achieved simply by allowing for the higher-order moments in the consump- tion regression, with the approximation order selected by these criteria. |
| Relation: | 中央研究院經濟研究所 每週研討會 |
| Data Type: | conference |
| Appears in Collections: | [國際經營與貿易學系 ] 會議論文
|
Files in This Item:
| File |
Description |
Size | Format | |
|---|
| upcovering.pdf | | 279Kb | Adobe PDF2 | 533 | View/Open |
|
All items in 政大典藏 are protected by copyright, with all rights reserved.
|
著作權政策宣告 Copyright Announcement1.本網站之數位內容為國立政治大學所收錄之機構典藏，無償提供學術研究與公眾教育等公益性使用，惟仍請適度，合理使用本網站之內容，以尊重著作權人之權益。商業上之利用，則請先取得著作權人之授權。
The digital content of this website is part of National Chengchi University Institutional Repository. It provides free access to academic research and public education for non-commercial use. Please utilize it in a proper and reasonable manner and respect the rights of copyright owners. For commercial use, please obtain authorization from the copyright owner in advance.
2.本網站之製作，已盡力防止侵害著作權人之權益，如仍發現本網站之數位內容有侵害著作權人權益情事者，請權利人通知本網站維護人員(
nccur@nccu.edu.tw)，維護人員將立即採取移除該數位著作等補救措施。
NCCU Institutional Repository is made to protect the interests of copyright owners. If you believe that any material on the website infringes copyright, please contact our staff(
nccur@nccu.edu.tw). We will remove the work from the repository and investigate your claim.
