Generalized maximum entropy (GME) estimator: formulation and a monte carlo study

The origin of entropy dates back to 19th century. In 1948, the entropy concept as a measure of uncertainty was developed by Shannon. A decade after in 1957, Jaynes formulated Shannon’s entropy as a method for estimation and inference particularly for ill-posed problems by proposing the so called Maximum Entropy (ME) principle. More recently, Golan et al. (1996) developed the Generalized Maximum Entropy (GME) estimator and started a new discussion in econometrics. This paper is divided into two parts. The first part considers the formulation of this new technique (GME). Second, by Monte Carlo simulations the estimation results of GME will be discussed in the context of non-normal disturbances.