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Structural estimation of jump-diffusion processes in macroeconomics

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  • Posch, Olaf

Abstract

This paper shows how to solve and estimate a continuous-time dynamic stochastic general equilibrium (DSGE) model with jumps. It also shows that a continuous-time formulation can make it simpler (relative to its discrete-time version) to compute and estimate the deep parameters using the likelihood function when non-linearities and/or non-normalities are considered. We illustrate our approach by solving and estimating the stochastic AK and the neoclassical growth models. Our Monte Carlo experiments demonstrate that non-normalities can be detected for this class of models. Moreover, we provide strong empirical evidence for jumps in aggregate US data.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 153 (2009)
Issue (Month): 2 (December)
Pages: 196-210

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Handle: RePEc:eee:econom:v:153:y:2009:i:2:p:196-210

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Web page: http://www.elsevier.com/locate/jeconom

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Keywords: Jump-diffusion estimation Continuous-time DSGE models Closed-form;

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Citations

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Cited by:
  1. Olaf Posch, 2009. "Explaining Output Volatility: The Case of Taxation," CESifo Working Paper Series 2751, CESifo Group Munich.
  2. Olaf Posch & Timo Trimborn, 2011. "Numerical Solution of Dynamic Equilibrium Models under Poisson Uncertainty," CESifo Working Paper Series 3431, CESifo Group Munich.
  3. Posch, Olaf & Trimborn, Timo, 2010. "Numerical solution of continuous-time DSGE models under Poisson uncertainty," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Leibniz Universität Hannover dp-450, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  4. Olaf Posch, 2010. "Risk Premia in General Equilibrium," CESifo Working Paper Series 3131, CESifo Group Munich.
  5. Olaf POSCH & Klaus WALDE, 2009. "On the non-causal link between volatility and growth," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2009025, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  6. Olaf Posch & Klaus Wälde, 2011. "On the link between volatility and growth," Journal of Economic Growth, Springer, vol. 16(4), pages 285-308, December.
  7. Robert Feicht & Wolfgang Stummer, 2010. "Complete Closed-form Solution to a Stochastic Growth Model and Corresponding Speed of Economic Recovery preliminary," DEGIT Conference Papers c015_041, DEGIT, Dynamics, Economic Growth, and International Trade.
  8. Klaus Wälde, 2009. "Production Technologies in Stochastic Continuous Time Models," CESifo Working Paper Series 2831, CESifo Group Munich.
  9. Guerrini, Luca, 2010. "A closed-form solution to the Ramsey model with logistic population growth," Economic Modelling, Elsevier, vol. 27(5), pages 1178-1182, September.
  10. Christian Bayer & Klaus Waelde, 2011. "Existence, Uniqueness and Stability of Invariant Distributions in Continuous-Time Stochastic Models," Working Papers 1111, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, revised 21 Jul 2011.

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