GLS with AR(k) errors

Econometrics questions and discussions
ying2728
Posts: 5
Joined: Thu Nov 01, 2012 6:17 pm

GLS with AR(k) errors

Unread post by ying2728 »

I want to estimate a linear equation by GLS with AR(k) errors:
y(t) = a + b x(t) + e(t),
where e(t) is an AR(k) series

Are there program codes available? Thanks.
TomDoan
Posts: 7814
Joined: Wed Nov 01, 2006 4:36 pm

Re: GLS with AR(k) errors

Unread post by TomDoan »

Use BOXJENK with the GLS option (under "Options for REGARIMA Models").
ying2728
Posts: 5
Joined: Thu Nov 01, 2012 6:17 pm

Re: GLS with AR(k) errors

Unread post by ying2728 »

If one of the regressors is lagged y, y(t-1), is it still OK? Thanks.
TomDoan
Posts: 7814
Joined: Wed Nov 01, 2006 4:36 pm

Re: GLS with AR(k) errors

Unread post by TomDoan »

No. You can't freely estimate a model like that. That's actually saying that Y is an AR(4) which means that there are four different identically fitting ways to write it as an AR(1) with AR(3) errors.
ying2728
Posts: 5
Joined: Thu Nov 01, 2012 6:17 pm

Re: GLS with AR(k) errors

Unread post by ying2728 »

How about using MA(k) errors? Same problem?
TomDoan
Posts: 7814
Joined: Wed Nov 01, 2006 4:36 pm

Re: GLS with AR(k) errors

Unread post by TomDoan »

Potentially different problem with cancellation if the error process isn't anywhere near that complicated. Is there a reason that you're not just fitting a minimal ARMA model?
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