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Tractable Likelihood-Based Estimation of Non- Linear DSGE Models

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  • Robert Kollmann

Abstract

This paper presents a simple and fast maximum likelihood estimation method for nonlinear DSGE models that are solved using a second- (or higher-) order accurate approximation. The method requires that the number of observables equals the number of exogenous shocks. Exogenous innovations are extracted recursively by inverting the observation equation, which allows easy computation of the likelihood function.

Suggested Citation

  • Robert Kollmann, 2017. "Tractable Likelihood-Based Estimation of Non- Linear DSGE Models," CAMA Working Papers 2017-55, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2017-55
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    File URL: https://crawford.anu.edu.au/sites/default/files/2025-01/55_2017_kollmann.pdf
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    Cited by:

    1. Beatrice Cherrier, 2023. "The Price of Virtue: Some Hypotheses on How Tractability Has Shaped Economic Models," Post-Print halshs-04378635, HAL.
    2. Dubois, Loick & Sahuc, Jean-Guillaume & Vermandel, Gauthier, 2025. "A general equilibrium approach to carbon permit banking," Journal of Environmental Economics and Management, Elsevier, vol. 129(C).
    3. Benmir, Ghassane & Jaccard, Ivan & Vermandel, Gauthier, 2023. "Optimal monetary policy in an estimated SIR model," European Economic Review, Elsevier, vol. 156(C).
    4. Jump, Robert Calvert & Levine, Paul, 2019. "Behavioural New Keynesian models," Journal of Macroeconomics, Elsevier, vol. 59(C), pages 59-77.
    5. Pablo Cuba‐Borda & Luca Guerrieri & Matteo Iacoviello & Molin Zhong, 2019. "Likelihood evaluation of models with occasionally binding constraints," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 34(7), pages 1073-1085, November.
    6. Eric Jondeau & Grégory Levieuge & Jean-Guillaume Sahuc & Gauthier Vermandel, 2022. "Environmental Subsidies to Mitigate Transition risk," Working Papers hal-04159804, HAL.

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    Keywords

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    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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