Estimation of Heuristic Switching in Behavioral Macroeconomic Models

Jiri Kukacka and Stephen Sacht

No 2021-01, Economics Working Papers from Christian-Albrechts-University of Kiel, Department of Economics

Abstract: This paper offers a simulation-based method for the estimation of heuristic switching in nonlinear macroeconomic models. Heuristic switching is an important feature of modeling strategy since it uses simple decision rules of boundedly rational heterogeneous agents. The simulation study shows that the proposed simulated maximum likelihood method identifies the behavioral effects that stay hidden for standard econometric approaches. In the empirical application, we estimate the structural and behavioral parameters of the US economy. We are especially able to reliably identify the intensity of choice that governs the models' nonlinear dynamics.

Keywords: Behavioral Heuristics; Heuristic Switching Model; Intensity of Choice; Simulated Maximum Likelihood (search for similar items in EconPapers)
JEL-codes: C53 D83 E12 E32 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-cmp, nep-cwa, nep-dcm, nep-ecm, nep-mac and nep-ore
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Journal Article: Estimation of heuristic switching in behavioral macroeconomic models (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cauewp:202101

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