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Finding starting-values for maximum likelihood estimation of vector STAR models

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  • Schleer, Frauke

Abstract

This paper focuses on finding starting-values for maximum likelihood estimation of Vector STAR models. Based on a Monte Carlo exercise, different procedures are evaluated. Their performance is assessed w.r.t. model fit and computational effort. I employ i) grid search algorithms, and ii) heuristic optimization procedures, namely, differential evolution, threshold accepting, and simulated annealing. In the equation-by-equation starting-value search approach the procedures achieve equally good results. Unless the errors are cross-correlated, equation-by-equation search followed by a derivative-based algorithm can handle such an optimization problem sufficiently well. This result holds also for higher-dimensional VSTAR models with a slight edge for the heuristic methods. Being faced with more complex Vector STAR models for which a multivariate search approach is required, simulated annealing and differential evolution outperform threshold accepting and the grid with a zoom.

Suggested Citation

  • Schleer, Frauke, 2013. "Finding starting-values for maximum likelihood estimation of vector STAR models," ZEW Discussion Papers 13-076, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:13076
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    Cited by:

    1. Schleer, Frauke & Semmler, Willi, 2015. "Financial sector and output dynamics in the euro area: Non-linearities reconsidered," Journal of Macroeconomics, Elsevier, vol. 46(C), pages 235-263.
    2. Willi Semmler & Christian R. Proaño, 2015. "Escape Routes from Sovereign Default Risk in the Euro Area," International Symposia in Economic Theory and Econometrics, in: Monetary Policy in the Context of the Financial Crisis: New Challenges and Lessons, volume 24, pages 163-193, Emerald Group Publishing Limited.
    3. Schleer, Frauke & Semmler, Willi, 2013. "Financial sector-output dynamics in the euro area: Non-linearities reconsidered," ZEW Discussion Papers 13-068, ZEW - Leibniz Centre for European Economic Research.

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    More about this item

    Keywords

    Vector STAR model; starting-values; optimization heuristics; grid search; estimation; non-linearieties;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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