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Estimating Dynamic Equilibrium Models using Macro and Financial Data
Publikation: Working paper/Preprint › Working paper › Forskning
Dokumenter
- Rp11 21
Forlagets udgivne version, 508 KB, PDF-dokument
- Bent Jesper Christensen
- Olaf Posch
- Michel van der Wel, Erasmus University Rotterdam, Holland
We show that including financial market data at daily frequency, along with macro
series at standard lower frequency, facilitates statistical inference on structural parameters in dynamic equilibrium models. Our continuous-time formulation conveniently accounts for the difference in observation frequency. We suggest two approaches for the estimation of structural parameters. The first is a simple regression-based procedure for estimation of the reduced-form parameters of the model, combined with a minimum-distance method for identifying the structural parameters. The second approach uses martingale estimating functions to estimate the structural parameters directly through a non-linear optimization scheme. We illustrate both approaches by estimating the stochastic AK model with mean-reverting spot interest rates. We also provide Monte Carlo evidence on the small sample behavior of the estimators and estimate the model using 20 years of U.S. macro and financial data.
series at standard lower frequency, facilitates statistical inference on structural parameters in dynamic equilibrium models. Our continuous-time formulation conveniently accounts for the difference in observation frequency. We suggest two approaches for the estimation of structural parameters. The first is a simple regression-based procedure for estimation of the reduced-form parameters of the model, combined with a minimum-distance method for identifying the structural parameters. The second approach uses martingale estimating functions to estimate the structural parameters directly through a non-linear optimization scheme. We illustrate both approaches by estimating the stochastic AK model with mean-reverting spot interest rates. We also provide Monte Carlo evidence on the small sample behavior of the estimators and estimate the model using 20 years of U.S. macro and financial data.
| Originalsprog | Engelsk |
|---|---|
| Udgiver | CREATES, Institut for Økonomi, Aarhus Universitet |
| Status | Udgivet - 2011 |
- Structural estimation; AK-Vasicek model; Martingale estimating function
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