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Estimating Nonlinear Economic Models Using Surrogate Transitions

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  • Matthew Smith

    (Federal Reserve Board)

Abstract

We propose a novel combination of algorithms for jointly estimating parameters and unobservable states in a nonlinear state space system. We exploit an approximation to the marginal likelihood to guide a Particle Marginal Metropolis-Hastings algorithm. While this algorithm seemingly targets reduced dimension marginal distributions, it draws from a joint distribution of much higher dimension. The algorithm is demonstrated on a stochastic volatility model and a Real Business Cycle model with robust preferences.

Suggested Citation

  • Matthew Smith, 2012. "Estimating Nonlinear Economic Models Using Surrogate Transitions," 2012 Meeting Papers 494, Society for Economic Dynamics.
  • Handle: RePEc:red:sed012:494
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    File URL: https://economicdynamics.org/meetpapers/2012/paper_494.pdf
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    References listed on IDEAS

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    1. Renate Meyer & David A. Fournier & Andreas Berg, 2003. "Stochastic volatility: Bayesian computation using automatic differentiation and the extended Kalman filter," Econometrics Journal, Royal Economic Society, vol. 6(2), pages 408-420, December.
    2. Martin M. Andreasen, 2010. "Non-linear DSGE Models and The Optimized Particle Filter," CREATES Research Papers 2010-05, Department of Economics and Business Economics, Aarhus University.
    3. Flury, Thomas & Shephard, Neil, 2011. "Bayesian Inference Based Only On Simulated Likelihood: Particle Filter Analysis Of Dynamic Economic Models," Econometric Theory, Cambridge University Press, vol. 27(05), pages 933-956, October.
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    Cited by:

    1. repec:aea:aecrev:v:107:y:2017:i:7:p:1971-2006 is not listed on IDEAS
    2. Bidder, Rhys & Smith, Matthew E., 2013. "Doubts and Variability: A Robust Perspective on Exotic Consumption Series," Working Paper Series 2013-28, Federal Reserve Bank of San Francisco, revised 23 Sep 2015.
    3. Christopher Gust & Edward Herbst & David López-Salido & Matthew E. Smith, 2017. "The Empirical Implications of the Interest-Rate Lower Bound," American Economic Review, American Economic Association, vol. 107(7), pages 1971-2006, July.

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