Extreme bounds analysis

Short description: Econometric technique

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

1. ↑ Leamer, Edward. "Extreme bounds analysis". http://www.dictionaryofeconomics.com/article?id=pde2008_E000250.
2. ↑ Granger, Clive; Uhlig, Harald (1990-04-01). "Reasonable extreme-bounds analysis" (in en). Journal of Econometrics 44 (1–2): 159–170. doi:10.1016/0304-4076(90)90077-7. ISSN 0304-4076. http://minneapolisfed.org/research/DP/DP2.pdf.
3. ↑ Ghosh, Sucharita; Yamarik, Steven (2004-07-01). "Are regional trading arrangements trade creating?: An application of extreme bounds analysis" (in en). 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" (in en). Journal of Multinational Financial Management 16 (2): 199–211. doi:10.1016/j.mulfin.2005.07.002. ISSN 1042-444X. http://www.latrobe.edu.au/__data/assets/pdf_file/0009/130887/2003.02.pdf.

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