Essays on Industrial Organization, Intellectual Property, and Econometrics
Author | : Shuo Chen |
Publisher | : |
Total Pages | : 115 |
Release | : 2005 |
ISBN-10 | : 1109845960 |
ISBN-13 | : 9781109845969 |
Rating | : 4/5 (60 Downloads) |
Book excerpt: The second essay shows that when estimating time-series regressions of unknown functional form, multicollinearity can make regressions very sensitive to small misspecifications of nonlinear relationships. This essay shows that a simple seminonparametric estimator can help to solve this problem. Specifically, adding a flexible time trend to the regression model will give significantly less biased OLS estimators, even if the model remains misspecified. This is because the trend is now fitted directly, so the other explanatory variables need to fit only fluctuations around the trend. A consistency result is proven, and Monte Carlo experiments are used to illustrate the approach.