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Re: Bai and Perron str break test using Non-linear estimatio
Posted: Wed Mar 04, 2015 2:56 pm
by startz
Guys...think I am getting crazy..Thats what I found in a published paper:
"Nonlinear least-squares estimates of the following equation: i=(1-ρ)(β+γ*p(t)+δ*y(t))+ρi(t-1)
where i is the Federal Funds Rate, p is forecasted inflation, and y is the output gap. "
First of all, the above model is linear or non-linear???? if its non-linear how do we estimate it in Eviews??
Much appreciated
The model can be equally well fit as a linear model. The intercept will be (1-ρ)β, the coefficient on p will be (1-ρ)γ etc.
Re: Bai and Perron str break test using Non-linear estimatio
Posted: Wed Mar 04, 2015 4:16 pm
by lakis
I definetly agree with you..to me this is a linear model...but with hell one should treat it as a nonlinear and estimate it like that ???
Re: Bai and Perron str break test using Non-linear estimatio
Posted: Wed Mar 04, 2015 4:18 pm
by startz
It lets you get the long-run coefficients directly.
Re: Bai and Perron str break test using Non-linear estimatio
Posted: Thu Mar 05, 2015 4:03 am
by trubador
Unfortunately, there are certain cases that one should estimate nonlinear relationship directly instead of linearizing it. But, this is not one of them. Startz and Glenn have already pointed you in the right direction. So, all you have to do is get your hands dirty:
Code: Select all
wfcreate m 1960 2014
!rho = 0.8
!beta = 0.5
!gamma = 1
!delta = 2
series x1 = nrnd
series x2 = nrnd
series y = nrnd
smpl @first+1 @last
y = (1-!rho)*(!beta+!gamma*x1+!delta*x2)+!rho*y(-1) + nrnd
coef(4) lcoef
equation eq_linear.ls y = lcoef(1) + lcoef(2)*x1 + lcoef(3)*x2 + lcoef(4)*y(-1)
coef(4) ncoef
equation eq_nonlinear.ls y=(1-ncoef(1))*(ncoef(2)+ncoef(3)*x1+ncoef(4)*x2)+ncoef(1)*y(-1)
coef(4) lcoef_e
lcoef_e(1) = (1-ncoef(1))*ncoef(2)
lcoef_e(2) = (1-ncoef(1))*ncoef(3)
lcoef_e(3) = (1-ncoef(1))*ncoef(4)
lcoef_e(4) = ncoef(1)
matrix(4,2) compare
colplace(compare,lcoef,1)
colplace(compare,lcoef_e,2)
show compare
Re: Bai and Perron str break test using Non-linear estimatio
Posted: Thu Mar 05, 2015 10:14 am
by lakis
Omg....You are absolutely right...I was just blind...thanks for the help all of you guys..
Much appreciated.xx
Re: Bai and Perron str break test using Non-linear estimatio
Posted: Thu Mar 05, 2015 10:17 am
by EViews Glenn
Note that if you want to get the long-run coefficients with standard errors after running the linear form, just put the expressions in the Wald test.