Extreme bounds analysis

In econometrics, extreme bounds analysis is a type of sensitivity analysis which attempts to determine the most extreme possible estimates for a fixed subset of allowed coefficients and a variable set of linear homogeneous restrictions.^[1] It was originally developed by Edward E. Leamer in 1983, and subsequently refined by Clive Granger and Harald Uhlig in 1990.^[2] It is a more precise method of measuring specification uncertainty than traditional econometrics because it incorporates prior information, and uses a systematic methodology to examine the fragility of coefficients.^[3] It allows researchers to obtain upper and lower limits for the parameter of interest for any possible set of explanatory variables.^[4]

References

^ Leamer, Edward. "Extreme bounds analysis". The New Palgrave Dictionary of Economics. Retrieved 2018-02-02.
^ Granger, Clive; Uhlig, Harald (1990-04-01). "Reasonable extreme-bounds analysis" (PDF). Journal of Econometrics. 44 (1–2): 159–170. doi:10.1016/0304-4076(90)90077-7. ISSN 0304-4076.
^ Ghosh, Sucharita; Yamarik, Steven (2004-07-01). "Are regional trading arrangements trade creating?: An application of extreme bounds analysis". Journal of International Economics. 63 (2): 369–395. doi:10.1016/S0022-1996(03)00058-8. ISSN 0022-1996.
^ Moosa, Imad; Cardak, Buly (2006-04-01). "The determinants of foreign direct investment: An extreme bounds analysis" (PDF). Journal of Multinational Financial Management. 16 (2): 199–211. doi:10.1016/j.mulfin.2005.07.002. ISSN 1042-444X.

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[1] Leamer, Edward. "Extreme bounds analysis". The New Palgrave Dictionary of Economics. Retrieved 2018-02-02.

[2] Granger, Clive; Uhlig, Harald (1990-04-01). "Reasonable extreme-bounds analysis" (PDF). Journal of Econometrics. 44 (1–2): 159–170. doi:10.1016/0304-4076(90)90077-7. ISSN 0304-4076.

[3] Ghosh, Sucharita; Yamarik, Steven (2004-07-01). "Are regional trading arrangements trade creating?: An application of extreme bounds analysis". Journal of International Economics. 63 (2): 369–395. doi:10.1016/S0022-1996(03)00058-8. ISSN 0022-1996.

[4] Moosa, Imad; Cardak, Buly (2006-04-01). "The determinants of foreign direct investment: An extreme bounds analysis" (PDF). Journal of Multinational Financial Management. 16 (2): 199–211. doi:10.1016/j.mulfin.2005.07.002. ISSN 1042-444X.

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