Shrinking the posterior: A note on the Nerlovian model
Tiffin, R. (2004) Shrinking the posterior: A note on the Nerlovian model. Journal of Agricultural Economics, 55 (1). pp. 115-121. ISSN 0021-857X
Full text not archived in this repository.
To link to this article DOI: 10.1111/j.1477-9552.2004.tb00083.x
Diebold and Lamb (1997) argue that since the long-run elasticity of supply derived from the Nerlovian model entails a ratio of random variables, it is without moments. They propose minimum expected loss estimation to correct this problem but in so-doing ignore the fact that a non white-noise-error is implicit in the model. We show that, as a consequence the estimator is biased and demonstrate that Bayesian estimation which fully accounts for the error structure is preferable.