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A Composite Likelihood Approach for Dynamic Structural Models

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  • Fabio Canova
  • Christian Matthes

Abstract

We describe how to use the composite likelihood to ameliorate estimation, computational, and inferential problems in dynamic stochastic general equilibrium models. We present a number of situations where the methodology has the potential to resolve well-known problems. In each case we consider, we provide an example to illustrate how the approach works and its properties in practice.

Suggested Citation

  • Fabio Canova & Christian Matthes, 2018. "A Composite Likelihood Approach for Dynamic Structural Models," Working Paper 18-12, Federal Reserve Bank of Richmond.
  • Handle: RePEc:fip:fedrwp:18-12
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    28. Cogley, Timothy & De Paoli, Bianca & Matthes, Christian & Nikolov, Kalin & Yates, Tony, 2011. "A Bayesian approach to optimal monetary policy with parameter and model uncertainty," Journal of Economic Dynamics and Control, Elsevier, vol. 35(12), pages 2186-2212.
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    Cited by:

    1. Joshua C. C. Chan & Eric Eisenstat & Chenghan Hou & Gary Koop, 2020. "Composite likelihood methods for large Bayesian VARs with stochastic volatility," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 35(6), pages 692-711, September.
    2. Paul Ho & Thomas A. Lubik & Christian Matthes, 2023. "Averaging Impulse Responses Using Prediction Pools," Working Paper 23-04, Federal Reserve Bank of Richmond.
    3. Loria, Francesca & Matthes, Christian & Wang, Mu-Chun, 2022. "Economic theories and macroeconomic reality," Journal of Monetary Economics, Elsevier, vol. 126(C), pages 105-117.
    4. Huong Hoang-Thi & Shah Fahad & Ashfaq Ahmad Shah & Tung Nguyen-Huu-Minh & Tuan Nguyen-Anh & Song Nguyen-Van & Nguyen To-The & Huong Nguyen-Thi-Lan, 2023. "Evaluating the farmers’ adoption behavior of water conservation in mountainous region Vietnam: extrinsic and intrinsic determinants," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 115(2), pages 1313-1330, January.
    5. Canova, Fabio & Sæterhagen Paulsen, Kenneth, 2023. "Symbolic stationarization of dynamic equilibrium models," Journal of Economic Dynamics and Control, Elsevier, vol. 154(C).
    6. Fabio Canova & Kenneth Sæterhagen Paulsen, 2021. "Symbolic Stationarization of Dynamic Equilibrium Models," Working Paper 2021/18, Norges Bank.

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    More about this item

    Keywords

    dynamic structural models; composite likelihood; identification; singularity; large scale models; panel data;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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