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Consistency properties of a simulation-based estimator for dynamic processes

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  • Manuel S. Santos

Abstract

This paper considers a simulation-based estimator for a general class of Markovian processes and explores some strong consistency properties of the estimator. The estimation problem is defined over a continuum of invariant distributions indexed by a vector of parameters. A key step in the method of proof is to show the uniform convergence (a.s.) of a family of sample distributions over the domain of parameters. This uniform convergence holds under mild continuity and monotonicity conditions on the dynamic process. The estimator is applied to an asset pricing model with technology adoption. A challenge for this model is to generate the observed high volatility of stock markets along with the much lower volatility of other real economic aggregates.

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  • Manuel S. Santos, 2010. "Consistency properties of a simulation-based estimator for dynamic processes," Papers 1001.2173, arXiv.org.
    • Handle: RePEc:arx:papers:1001.2173
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    References listed on IDEAS

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    1. Mirman, Leonard J. & Morand, Olivier F. & Reffett, Kevin L., 2008. "A qualitative approach to Markovian equilibrium in infinite horizon economies with capital," Journal of Economic Theory, Elsevier, vol. 139(1), pages 75-98, March.
    2. Manuel S. Santos & Adrian Peralta-Alva, 2005. "Accuracy of Simulations for Stochastic Dynamic Models," Econometrica, Econometric Society, vol. 73(6), pages 1939-1976, November.
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    5. Jesús Fernández-Villaverde & Juan F. Rubio-Ramírez & Manuel S. Santos, 2006. "Convergence Properties of the Likelihood of Computed Dynamic Models," Econometrica, Econometric Society, vol. 74(1), pages 93-119, January.
    6. Carrasco, Marine & Florens, Jean-Pierre, 2002. "Simulation-Based Method of Moments and Efficiency," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(4), pages 482-492, October.
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    9. Manuel S. Santos & Adrian Peralta-Alva, 2005. "Accuracy of Simulations for Stochastic Dynamic Models," Econometrica, Econometric Society, vol. 73(6), pages 1939-1976, November.
    10. Gallant, A. Ronald & Tauchen, George, 2002. "Simulated Score Methods and Indirect Inference for Continuous-time Models," Working Papers 02-09, Duke University, Department of Economics.
    11. Santos, Manuel S., 2004. "Simulation-based estimation of dynamic models with continuous equilibrium solutions," Journal of Mathematical Economics, Elsevier, vol. 40(3-4), pages 465-491, June.
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    Cited by:

    1. Manuel S. Santos & Adrian Peralta-Alva, 2012. "Analysis of Numerical Errors," Working Papers 2012-6, University of Miami, Department of Economics.
    2. Miguel A. Iraola & Manuel S. Santos, 2009. "Long Term Asset Price Volatility and Macroeconomic Fluctuations," Working Papers 2010-1, University of Miami, Department of Economics.

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    More about this item

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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