Varying and random coefficient regression models in economics: An overview

This paper summarises various random coefficient models that have been developed for econometric applications. It contains econometric formulations which it is assumed that coefficients vary across time. Depending on accepted parameter variation structure one may classify such models into two groups, namely: models with variable but nonstochastic parameters; and models with randomly varying coefficients. The latter group consists of two types-models where coefficients are generated from stationary and models in which coefficients are generated from nonstationary stochastic processes. A framework for each group is shown with special emphasis on the characteristics and applicability of the various model formulations. An extensive bibliography is provided for further reference.