Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/284153 
Year of Publication: 
2022
Series/Report no.: 
Cardiff Economics Working Papers No. E2022/10
Publisher: 
Cardiff University, Cardiff Business School, Cardiff
Abstract: 
Maximum Likelihood (ML) shows both lower power and higher bias in small sample Monte Carlo experiments than Indirect Inference (II) and IIís higher power comes from its use of the model-restricted distribution of the auxiliary model coeffi cients (Le et al. 2016). We show here that IIís higher power causes it to have lower bias, because false parameter values are rejected more frequently under II; this greater rejection frequency is partly o§set by a lower tendency for ML to choose unrejected false parameters as estimates, due again to its lower power allowing greater competition from rival unrejected parameter sets.
Subjects: 
Bias
Indirect Inference
Maximum Likelihood
JEL: 
C12
C32
C52
Document Type: 
Working Paper

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