A stochastic-simulation method is proposed in this paper for obtaining median unbiased estimates of lagged dependent variable coeﬀicients in macroeconomic models. Estimated biases for 13 equations of a macroeconomic model are computed. These biases are on average somewhat smaller in absolute bias than would be expected from Andrews’ exact results for an equation with only a constant term, time trend, and lagged dependent variable, although they are larger than would be expected from Hurwicz’s original estimates. In a practical sense the estimated biases are not very large because they have little eﬀect on the overall predictive accuracy of the model and on its multiplier properties.
Fair, Ray C., "Estimates of the Bias of Lagged Dependent Variable Coefficient Estimates in Macroeconomic Equations" (1992). Cowles Foundation Discussion Papers. 1248.