On improving Almon estimation in distributed lag models with multicollinearity

The Almon procedure is a standard method for estimating distributed lag models, but it is highly vulnerable to multicollinearity among lagged regressors, reducing estimation reliability. Although several biased Almon-type estimators have been proposed, they remain sensitive to strong correlations, limiting their effectiveness. This study introduces a new Almon-type biased estimator specifically designed to improve robustness under multicollinearity. We derive the necessary and sufficient conditions under which the proposed estimator surpasses existing alternatives using the matrix mean squared error criterion. Monte Carlo simulations and two empirical applications confirm its superiority, showing consistently lower mean squared error values.

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Publication Details

Journal
Communications in Statistics - Simulation and Computation
Published
2026-09-06
DOI
https://doi.org/10.1080/03610918.2026.2725846
Primary Topic
Advanced Statistical Methods and Models
Type
article
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article

On improving Almon estimation in distributed lag models with multicollinearity

Muhammad Aslam, Muhammad Imdadullah, Zakariya Yahya Algamal, Liban Ali Mohamud
Communications in Statistics - Simulation and Computation
Advanced Statistical Methods and Models
article

On improving Almon estimation in distributed lag models with multicollinearity

Muhammad Aslam, Muhammad Imdadullah, Zakariya Yahya Algamal, Liban Ali Mohamud
article en

Abstract

The Almon procedure is a standard method for estimating distributed lag models, but it is highly vulnerable to multicollinearity among lagged regressors, reducing estimation reliability. Although several biased Almon-type estimators have been proposed, they remain sensitive to strong correlations, limiting their effectiveness. This study introduces a new Almon-type biased estimator specifically designed to improve robustness under multicollinearity. We derive the necessary and sufficient conditions under which the proposed estimator surpasses existing alternatives using the matrix mean squared error criterion. Monte Carlo simulations and two empirical applications confirm its superiority, showing consistently lower mean squared error values.

Communications in Statistics - Simulation and Computation
University of Mosul (IQ), Bahauddin Zakariya University (PK), Ghazi University (PK), SIMAD University (SO)
Openalex Percentile: Top 7%
Advanced Statistical Methods and Models
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