Computational Methods in Econometrics
by
Vassilis Hajivassiliou
August 2007
Abstract
In evaluating the importance and usefulness of particular econometric methods, it is customary to focus on the set of *statistical* properties that a method possesses, e.g., unbiasedness, consistency, efficiency, asymptotic normality, etc. It is crucial to stress, however, that meaningful comparisons cannot be completed without paying attention also to a method's *computational* properties. Indeed the practical value of an econometric method can only be assessed by examining the inevitable interplay between the two classes of properties, since a method with excellent statistical properties may be computationally infeasible and vice versa. Computational methods in econometrics are evolving over time to reflect the current technological boundaries as defined by available computer hardware and software capabilities at a particular period, and hence are inextricably linked with determining what the state-of-the-art is in econometric methodology.
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