COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
AT YALE UNIVERSITY

Box 208281
New Haven, CT 06520-8281

COWLES FOUNDATION DISCUSSION PAPER NO. 803

"Temporal Dependence n Limited Dependent Variable Models:
Theoretical and Monte-Carlo Results"

Vassilis A. Hajivassiliou

August 1986

This paper analyzes the consistency properties of classical estimators for limited dependent variables models, under conditions of serial correlation in the unobservables. A unified method of proof is used to show that for certain cases (e.g., Probit, Tobit and Normal Switching Regimes models, which are normality-based) estimators that neglect particular types of serial dependence (specifically, corresponding to the class of "mixing" processes) are still consistent. The same line of proof fails for the analogues to the above models that impose logistic distributional assumptions, thus indicating that normality plays a special role in these problems. Sets of Monte-Carlo experiments are then carried out to investigate these theoretical results.

JEL Classification: 211

Keywords: Consistency, serial dependence, mixing processes, limited dependent variables models, probit, logit, tobit, normality