Estimation of Taylor rule with smoothing parameter

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res
Posts: 5
Joined: Sun Apr 15, 2018 5:45 am

Estimation of Taylor rule with smoothing parameter

Postby res » Sun Apr 15, 2018 7:23 am

Hello,
I am interested in the estimation of Taylor rule with interest rate smoothing, like in the attached picture.
I have done only simple regressions, but I have never done regression with rho(smoothing parameter).
Can anyone suggest how it can be done in EViews?
Thank you in advance!
Image

startz
Non-normality and collinearity are NOT problems!
Posts: 3338
Joined: Wed Sep 17, 2008 2:25 pm

Re: Estimation of Taylor rule with smoothing parameter

Postby startz » Sun Apr 15, 2018 7:47 am

You can specify a regression in EViews by writing out an equation using c(1), c(2), etc as names for the coefficients, as in

Code: Select all

ls y=c(1)*c(2) + c(2)*x

res
Posts: 5
Joined: Sun Apr 15, 2018 5:45 am

Re: Estimation of Taylor rule with smoothing parameter

Postby res » Sun Apr 15, 2018 9:43 am

Thank you for your reply.
I now understand that I porbably need to do this regression with GMM method, I specified everything, but something is wrong as I get message singular matrix. How can I fix this?
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startz
Non-normality and collinearity are NOT problems!
Posts: 3338
Joined: Wed Sep 17, 2008 2:25 pm

Re: Estimation of Taylor rule with smoothing parameter

Postby startz » Sun Apr 15, 2018 9:53 am

I think that the problem is that you have both included c and clicked include a constant in the instrument list.

res
Posts: 5
Joined: Sun Apr 15, 2018 5:45 am

Re: Estimation of Taylor rule with smoothing parameter

Postby res » Sun Apr 15, 2018 10:00 am

I deleted c from the instrumental list, but it still does not work and I get message singular matrix. Maybe you have other ideas?
I am so desperate, don't know how to solve this problem.

startz
Non-normality and collinearity are NOT problems!
Posts: 3338
Joined: Wed Sep 17, 2008 2:25 pm

Re: Estimation of Taylor rule with smoothing parameter

Postby startz » Sun Apr 15, 2018 10:55 am

What you've done looks right. Since your model is linear, you might try the TSLS command and see if that works. Also, before you run GMM set c=0.

res
Posts: 5
Joined: Sun Apr 15, 2018 5:45 am

Re: Estimation of Taylor rule with smoothing parameter

Postby res » Sun Apr 15, 2018 11:11 am

What do you mean by set c=0? How can I do that? Will it impact results?
Thank you in advance!

startz
Non-normality and collinearity are NOT problems!
Posts: 3338
Joined: Wed Sep 17, 2008 2:25 pm

Re: Estimation of Taylor rule with smoothing parameter

Postby startz » Sun Apr 15, 2018 11:13 am

Type c=0 into the command line before estimating an equation. This resets the starting values of the coefficients. Not likely to matter, but there's a chance.

res
Posts: 5
Joined: Sun Apr 15, 2018 5:45 am

Re: Estimation of Taylor rule with smoothing parameter

Postby res » Sun Apr 15, 2018 11:30 am

It still does not work.
Tried to do the same way as in this pdf http://coin.wne.uw.edu.pl/~lgoczek/pdf/ ... trics5.pdf, but no results.
The problem only disappears when I remove a constant term c(2) from the regression, but I cannot use such result, I think.
Anyway, thank you for your help and time, I really appreciate that!


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