A bayesian analysis of a random coefficient model in a simple keynesian system

The marginal propensity to consume in a simple Keynesian model is treated as a random coefficient. This gives rise to the problem of quotient of random variables, i.e., the Fieller-Creasy problem. The Bayesian and maximum likelihood estimators are compared in sampling experiments. The Bayesian estimators have smaller mean squared errors than the maximum likelihood estimators. Marginal posterior probability density functions for a given sample are also presented.