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Dynamic Multinomial Ordered Choice with an Application to the Estimation of Monetary Policy Rules

Author

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  • Basu Deepankar

    (Ohio State University)

  • de Jong Robert M

    (Ohio State University)

Abstract

We present a novel specification of a dynamic multinomial ordered choice model, where the latent variable is a function of strictly stationary exogenous variables and lags of the choice variable. We prove that such a model with weakly dependent errors will have a strictly stationary solution which is L-2 near epoch dependent. We also derive consistency and asymptotic normality of the maximum likelihood estimator for a probit specification of the model. We illustrate a possible application of the model by estimating a discrete version of a robust ``difference" monetary policy rule for the period 1990:2006 at a monthly frequency.

Suggested Citation

  • Basu Deepankar & de Jong Robert M, 2007. "Dynamic Multinomial Ordered Choice with an Application to the Estimation of Monetary Policy Rules," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 11(4), pages 1-35, December.
    • Handle: RePEc:bpj:sndecm:v:11:y:2007:i:4:n:2
    DOI: 10.2202/1558-3708.1507
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    Cited by:

    1. Kheifets, Igor & Velasco, Carlos, 2017. "New goodness-of-fit diagnostics for conditional discrete response models," Journal of Econometrics, Elsevier, vol. 200(1), pages 135-149.
    2. Igor Kheifets & Carlos Velasco, 2012. "Model Adequacy Checks for Discrete Choice Dynamic Models," Working Papers w0170, New Economic School (NES).
    3. David Dale & Andrei Sirchenko, 2021. "Estimation of nested and zero-inflated ordered probit models," Stata Journal, StataCorp LP, vol. 21(1), pages 3-38, March.

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