Journal of Econometrics 12 (1980) 59-84

COMPUTATIONS FOR CONSTRAINED LINEAR MODELS

A. Ronald GALLANT and Thomas M. GERIG

North Carolina State University, Raleigh, NC 27650, USA

The article presents an algorithm for linear regression computations subject to linear parametric equality constraints, linear parametric inequality constraints, or a mixture of the two. No rank conditions are imposed on the regression specification or the constraint specification. The algorithm requires a full Moore-Penrose g-inverse which entails extra computational effort relative to other orthonormalization type algorithms. In exchange, auxiliary statistical information is generated: feasibility of a set of constraints may be checked, estimability of a linear parametric function may be checked, and bias and variance may be decomposed by source.