Re: [Gretl-users] AR(1) sepcification in TSLS or 3SLS
On Fri, 20 Jul 2012, Rodrigo Alfaro Arancibia wrote:
Please note from EViews' manual: "EViews estimates the model
as a
nonlinear regression model (...), require specification of additional
instruments to satisfy the instrument order condition for the transformed
specification. By default, the first-stage instruments employed in TSLS are
formed as if one were running Cochrane-Orcutt using Fair’s prescription."
Therefore you cannot replicate the results using 2SLS in gretl or
other software given that 2SLS are linear models. The fact that EViews
does a nonlinear regression is rooted in the Cochrane-Orcutt procedure
which, in the standard LS context, imposes constraints on the coefficients.
You _can_ replicate them in gretl: actually, from what you describe you
have the choice of using
a) the nls command
b) the mle command
c) the gmm command
Only, it's a lot more work. But if you had the absolute necessity of
replicating Eviews' algorithm, it's perfectly possible.
I agree with Sven and Jack that you could add more lags to your
model
in order to deal with the "AR(1)-problem". Also, note that EViews'
approach
is based on Fair (1970) solution. For sure there are more recent papers
regarding this issue.
Does it sound very silly to agree with someone who agrees with you?
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Riccardo (Jack) Lucchetti
Dipartimento di Economia
Università Politecnica delle Marche
(formerly known as Università di Ancona)
r.lucchetti(a)univpm.it
http://www2.econ.univpm.it/servizi/hpp/lucchetti
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