Comparing dynamic equilibrium economies to data
AbstractThis paper studies the properties of the Bayesian approach to estimation and comparison of dynamic equilibrium economies. Both tasks can be performed even if the models are nonnested, misspecified, and nonlinear. First, the authors show that Bayesian methods have a classical interpretation: asymptotically the parameter point estimates converge to their pseudotrue values, and the best model under the Kullback-Leibler will have the highest posterior probability. Second, they illustrate the strong small sample behavior of the approach using a well-known application: the U.S. cattle cycle. Bayesian estimates outperform maximum likelihood results, and the proposed model is easily compared with a set of BVARs.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 2001-23.
Date of creation: 2001
Date of revision:
Other versions of this item:
- NEP-ALL-2004-02-10 (All new papers)
- NEP-DGE-2002-02-15 (Dynamic General Equilibrium)
- NEP-PKE-2002-02-15 (Post Keynesian Economics)
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