A comparison of Alternative Esstimators of Macroeconomic Model in Etiopic
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Date
2008-06
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Addis Abeba university
Abstract
During the past 5 decades a number of econometric techniques were developed and applied to a variety of
econometric relationships to deal with the problem of single equation estimation as well as simultaneous
equations bias. These days, such methods have very wide applications especially in more developed
countries. However, there has been very little attempt to apply these techniques to empirical relationships
describing the macroeconomic sector of developing countries in general and Ethiopia in particular. In this
study, a small macro econometric model of Ethiopia is used to identify the best estimation techniques that will
produce accurate forecast of the economy of Ethiopia. In this study six econometric methods were considered.
The prediction accuracy of these estimators of economic model was examined using time series data covering
the period 1970 to 2004. The results indicated that considerable gain in forecasting accuracy can be achieved
by using 2SLSAUT01 and 2SLSAUT02 than simple ordinary least squares or two stage least squares to
estimate macroeconomic models. Moreover, the results do indicate that series attempts should be made to
estimate models by techniques other than ordinary least squares or two-stage least squares
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Keywords
Estimators of Macroecnomic