RANDOM COEFFICIENT MODELS: THEORY AND APPLICATIONS |
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| Authors: | P A V B Swamy George S Tavlas |
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| Institution: | Federal Reserve Board, Washington, DC;International Monetary Fund, Washington, DC |
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| Abstract: | Abstract. This paper provides an overview of the rationale behind, and the implementation, and uses of, the random coefficient approach to econometric modelling. A simple random coefficient model is presented, and methods for estimating, testing, and validating such a model are described. A more general model is then presented. The general model is shown to include several fixed-coefficient models as special cases and can be estimated incorporating a variety of judgements concerning simplification. Finally, the paper reviews recent applications of random coefficient estimation. |
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| Keywords: | Random coefficient models fixed-coefficient models model validation direct effects indirect effects stochastic laws |
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