Journal Article

Estimating Macroeconomic Models: A Likelihood Approach

Jesús Fernández-Villaverde and Juan F. Rubio-Ramírez

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 74, issue 4, pages 1059-1087
Published in print October 2007 | ISSN: 0034-6527
Published online October 2007 | e-ISSN: 1467-937X | DOI: https://dx.doi.org/10.1111/j.1467-937X.2007.00437.x
Estimating Macroeconomic Models: A Likelihood Approach

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  • General Aggregative Models
  • Prices, Business Fluctuations, and Cycles
  • Econometric Modelling

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This paper shows how particle filtering facilitates likelihood-based inference in dynamic macroeconomic models. The economies can be non-linear and/or non-normal. We describe how to use the output from the particle filter to estimate the structural parameters of the model, those characterizing preferences and technology, and to compare different economies. Both tasks can be implemented from either a classical or a Bayesian perspective. We illustrate the technique by estimating a business cycle model with investment-specific technological change, preference shocks, and stochastic volatility.

Keywords: C51; E17; E32; E37

Journal Article.  11541 words.  Illustrated.

Subjects: General Aggregative Models ; Prices, Business Fluctuations, and Cycles ; Econometric Modelling

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