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On the Estimation of Behavioral Macroeconomic Models via Simulated Maximum Likelihood

The result's identifiers

  • Result code in IS VaVaI

    <a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11230%2F18%3A10392656" target="_blank" >RIV/00216208:11230/18:10392656 - isvavai.cz</a>

  • Result on the web

    <a href="http://www.vwl.uni-kiel.de/EconomicsWorkingPapers/EWP-2018-11.pdf" target="_blank" >http://www.vwl.uni-kiel.de/EconomicsWorkingPapers/EWP-2018-11.pdf</a>

  • DOI - Digital Object Identifier

Alternative languages

  • Result language

    angličtina

  • Original language name

    On the Estimation of Behavioral Macroeconomic Models via Simulated Maximum Likelihood

  • Original language description

    In this paper, we introduce the simulated maximum likelihood method for identifying behavioral heuristics of heterogeneous agents in the baseline three-equation New Keynesian model. The method is extended to multivariate macroeconomic optimization problems, and the estimation procedure is applied to empirical data sets. This approach considerably relaxes restrictive theoretical assumptions and enables a novel estimation of the intensity of choice parameter in discrete choice. In Monte Carlo simulations, we analyze the properties and behavior of the estimation method, which provides important information on the behavioral parameters of the New Keynesian model. However, the curse of dimensionality arises via a consistent downward bias for idiosyncratic shocks. Our empirical results show that the forward-looking version of both the behavioral and the rational model specifications exhibits good performance. We identify potential sources of misspecification for the hybrid version. A novel feature of our analysis is that we pin down the switching parameter for the intensity of choice for the Euro Area and US economy.

  • Czech name

  • Czech description

Classification

  • Type

    J<sub>ost</sub> - Miscellaneous article in a specialist periodical

  • CEP classification

  • OECD FORD branch

    50201 - Economic Theory

Result continuities

  • Project

  • Continuities

    I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Others

  • Publication year

    2018

  • Confidentiality

    S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Data specific for result type

  • Name of the periodical

    Economics Working Papers

  • ISSN

    2193-2476

  • e-ISSN

  • Volume of the periodical

    2018

  • Issue of the periodical within the volume

    12

  • Country of publishing house

    DE - GERMANY

  • Number of pages

    32

  • Pages from-to

    1-32

  • UT code for WoS article

  • EID of the result in the Scopus database