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Estimation of Multi-market Fix-Price Models: An Application of Pseudo Maximum Likelihood Methods

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  • Laroque, Guy
  • Salanie, Bernard

Abstract

The past decade has seen the econometric implementation of macroeconomic multimarket fix-price models for a number of European countries. The procedure in use, the full information maximum likelihood method, unfortunately becomes very cumbersome and seems out of reach when additional features are incorporated in the model (disaggregation into micro markets, opinion surveys ...). One purpose of the present work is to prove the fruitfulness of the following estimation strategy: use Monte Carlo simulations to compute the first- and second-order moments of the endogenous variables, and maximize a resulting pseudo likelihood function to estimate the parameters. Copyright 1989 by The Econometric Society.

Suggested Citation

  • Laroque, Guy & Salanie, Bernard, 1989. "Estimation of Multi-market Fix-Price Models: An Application of Pseudo Maximum Likelihood Methods," Econometrica, Econometric Society, vol. 57(4), pages 831-860, July.
  • Handle: RePEc:ecm:emetrp:v:57:y:1989:i:4:p:831-60
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    Cited by:

    1. Ghysels, Eric & Guay, Alain, 2003. "Structural change tests for simulated method of moments," Journal of Econometrics, Elsevier, vol. 115(1), pages 91-123, July.
    2. Calzolari, Giorgio, 1992. "Stima delle equazioni simultanee non-lineari: una rassegna
      [Estimation of nonlinear simultaneous equations: a survey]
      ," MPRA Paper 24123, University Library of Munich, Germany, revised 1992.
    3. Hajivassiliou, Vassilis A. & Ruud, Paul A., 1986. "Classical estimation methods for LDV models using simulation," Handbook of Econometrics,in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 40, pages 2383-2441 Elsevier.
    4. Jesús Fernández-Villaverde & Juan F. Rubio-Ramírez, 2007. "Estimating Macroeconomic Models: A Likelihood Approach," Review of Economic Studies, Oxford University Press, vol. 74(4), pages 1059-1087.
    5. Calzolari, Giorgio & Magazzini, Laura & Mealli, Fabrizia, 2001. "Simulation-based estimation of Tobit model with random effects," MPRA Paper 22985, University Library of Munich, Germany, revised 2001.
    6. Arabinda Das, 2015. "Copula-based Stochastic Frontier Model with Autocorrelated Inefficiency," Central European Journal of Economic Modelling and Econometrics, CEJEME, vol. 7(2), pages 111-126, June.
    7. Matthew J. Lindquist, 2005. "Capital-Skill Complementarity and Inequality in Sweden," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(4), pages 711-735, December.
    8. Pradhan, M.P. & van Soest, A.H.O., 1994. "Household labour supply in urban areas of a developing country," Discussion Paper 1994-29, Tilburg University, Center for Economic Research.
    9. Catia Batista, 2007. "Joining the EU: Capital Flows, Migration and Wages," Economics Series Working Papers 342, University of Oxford, Department of Economics.
    10. Jacquinot, Pascal & Mihoubi, F., 1996. "Dynamique et hétérogénéité de l’emploi en déséquilibre," L'Actualité Economique, Société Canadienne de Science Economique, vol. 72(2), pages 113-148, juin.
    11. Frank Amalric & Alain Gubian & Pierre-Alain Muet, 1990. "Modèles de déséquilibre et échanges extérieurs : deux approches appliquées au secteur industriel français," Économie et Prévision, Programme National Persée, vol. 94(3), pages 129-140.
    12. George Tauchen, 1998. "The Objective Function Of Simulation Estimators Near The Boundary Of The Unstable Region Of The Parameter Space," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 389-398, August.
    13. repec:eee:econom:v:198:y:2017:i:2:p:189-208 is not listed on IDEAS
    14. Salima Hamouche, 1993. "Contribution à l'étude du déséquilibre sur le marché algérien des biens de consommation," Économie et Prévision, Programme National Persée, vol. 108(2), pages 63-74.
    15. Riadh Ben Jelili, 1995. "Investissement et rationnement sur le marché tunisien des importations de biens d'équipement," Économie et Prévision, Programme National Persée, vol. 119(3), pages 43-58.
    16. Monfort, Alain, 1992. "Quelques développements récents des méthodes macroéconométriques," L'Actualité Economique, Société Canadienne de Science Economique, vol. 68(1), pages 305-324, mars et j.
    17. Riadh Ben Jelili & Salima Hamouche & Ferhat Mihoubi, 1994. "Le pseudo-maximum de vraisemblance théorique et simulé. Application au cas des modèles de déséquilibre," Économie et Prévision, Programme National Persée, vol. 112(1), pages 149-174.
    18. Vassilis A. Hajivassiliou, 1991. "Simulation Estimation Methods for Limited Dependent Variable Models," Cowles Foundation Discussion Papers 1007, Cowles Foundation for Research in Economics, Yale University.
    19. Kristensen, Dennis & Salanié, Bernard, 2017. "Higher-order properties of approximate estimators," Journal of Econometrics, Elsevier, vol. 198(2), pages 189-208.

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