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Indirect Estimation of Stochastic Differential Equation Models: Some Computational Experiments


  • Bianchi, Carlo
  • Cleur, Eugene M


In this paper we consider the estimation of some stochastic differential equation models by an indirect estimation method proposed by Gourieroux, Monfort and Renault (1993) using discrete data. The performance of this method is analysed via Monte Carlo experiments. In particular, we examine the Vasicek and the Cox, Ingersoll and Ross models used in financial economics and a system of three stochastic differential equations proposed by P.C.B. Phillips in 1972. These results show the ability of indirect estimation to remove the bias resulting from the discretisation of the continuous model. Citation Copyright 1996 by Kluwer Academic Publishers.

Suggested Citation

  • Bianchi, Carlo & Cleur, Eugene M, 1996. "Indirect Estimation of Stochastic Differential Equation Models: Some Computational Experiments," Computational Economics, Springer;Society for Computational Economics, vol. 9(3), pages 257-274, August.
  • Handle: RePEc:kap:compec:v:9:y:1996:i:3:p:257-74

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    References listed on IDEAS

    1. Arifovic, Jasmina, 1994. "Genetic algorithm learning and the cobweb model," Journal of Economic Dynamics and Control, Elsevier, vol. 18(1), pages 3-28, January.
    2. Marimon, Ramon & Sunder, Shyam, 1994. "Expectations and Learning under Alternative Monetary Regimes: An Experimental Approach," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(1), pages 131-162, January.
    3. Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
    4. Arifovic, Jasmina & Eaton, Curtis, 1995. "Coordination via Genetic Learning," Computational Economics, Springer;Society for Computational Economics, vol. 8(3), pages 181-203, August.
    5. James B. Bullard & John Duffy, 1995. "On learning and the stability of cycles," Working Papers 1995-006, Federal Reserve Bank of St. Louis.
    6. Bullard, James & Duffy, John, 1998. "A model of learning and emulation with artificial adaptive agents," Journal of Economic Dynamics and Control, Elsevier, vol. 22(2), pages 179-207, February.
    7. Arifovic, Jasmina, 1995. "Genetic algorithms and inflationary economies," Journal of Monetary Economics, Elsevier, vol. 36(1), pages 219-243, August.
    8. Bullard James, 1994. "Learning Equilibria," Journal of Economic Theory, Elsevier, vol. 64(2), pages 468-485, December.
    9. Routledge, Bryan R, 1999. "Adaptive Learning in Financial Markets," Review of Financial Studies, Society for Financial Studies, vol. 12(5), pages 1165-1202.
    10. Arifovic, Jasmina, 1996. "The Behavior of the Exchange Rate in the Genetic Algorithm and Experimental Economies," Journal of Political Economy, University of Chicago Press, vol. 104(3), pages 510-541, June.
    11. Arifovic, Jasmina & Bullard, James & Duffy, John, 1997. "The Transition from Stagnation to Growth: An Adaptive Learning Approach," Journal of Economic Growth, Springer, vol. 2(2), pages 185-209, July.
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    Cited by:

    1. Giorgio Calzolari & F. Di Iorio & G. Fiorentini, 1999. "Indirect Estimation of Just-Identified Models with Control Variates," Econometrics Working Papers Archive quaderno46, Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti".
    2. Di Iorio, Francesca & Calzolari, Giorgio, 2006. "Discontinuities in indirect estimation: An application to EAR models," Computational Statistics & Data Analysis, Elsevier, vol. 50(8), pages 2124-2136, April.
    3. Giorgio Calzolari & Francesca Di Iorio & Gabriele Fiorentini, 1998. "Control variates for variance reduction in indirect inference: Interest rate models in continuous time," Econometrics Journal, Royal Economic Society, vol. 1(Conferenc), pages 100-112.

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