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Structural estimation of jump-diffusion processes in macroeconomics

  • Posch, Olaf

This paper shows how to solve and estimate a continuous-time dynamic stochastic general equilibrium (DSGE) model with jumps. It also shows that a continuous-time formulation can make it simpler (relative to its discrete-time version) to compute and estimate the deep parameters using the likelihood function when non-linearities and/or non-normalities are considered. We illustrate our approach by solving and estimating the stochastic AK and the neoclassical growth models. Our Monte Carlo experiments demonstrate that non-normalities can be detected for this class of models. Moreover, we provide strong empirical evidence for jumps in aggregate US data.

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Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 153 (2009)
Issue (Month): 2 (December)
Pages: 196-210

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Handle: RePEc:eee:econom:v:153:y:2009:i:2:p:196-210
Contact details of provider: Web page: http://www.elsevier.com/locate/jeconom

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