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Estimating Macroeconomic Models: A Likelihood Approach

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Fernández-Villaverde, Jesús
Rubio-Ramirez, Juan Francisco

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Abstract

This paper shows how particle filtering allows us to undertake likelihood-based inference in dynamic macroeconomic models. The models can be nonlinear 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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5513.

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Date of creation: Mar 2006
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Handle: RePEc:cpr:ceprdp:5513

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Related research
Keywords: business cycle; dynamic macroeconomic models; nonlinear and/or non-normal models; particle filtering; stochastic volatility;

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Find related papers by JEL classification:
C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Bayesian Analysis
C5 - Mathematical and Quantitative Methods - - Econometric Modeling
E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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