Adaptive optimal estimation control strategies for systems of simultaneous equations

AbstractThe choice of control strategies to improve estimation of the parameters in a model of a simultaneous equations system with time-varying parameters is considered. Open-loop feedback (OLF) sequential procedures for handling nonlinear restrictions on reduced form parameters implied by the structural form are suggested, and the combination of sequential estimation and design control strategies feature a marked improvement in the behavior of estimates over the nonsequential [open-loop (OL)] formulation. The maximum accuracy control problem considered in this paper can also be treated as an initial phase of a forecasting and/or stochastic control problem. This will avoid solution to a more difficult problem such as the dual control problem