Through the looking glass: Indirect inference via simple equilibria

Laurent Calvet and Veronika Czellar

Journal of Econometrics, 2015, vol. 185, issue 2, 343-358

Abstract: This paper develops an indirect inference (Gourieroux et al., 1993; Smith, 1993) estimation method for a large class of dynamic equilibria. Our approach consists of constructing econometrically tractable auxiliary equilibria, obtained by simplifying the economic primitives of the structural equilibrium model, via which estimation can proceed. We use this approach to develop an accurate estimator for the long-run risk model of Bansal and Yaron (2004). We demonstrate the method in Monte Carlo simulations and implement it on U.S. data. We also illustrate the good performance of the proposed methodology on an equilibrium model with investor learning.

Keywords: Hidden Markov model; Long-run risk; Learning; Value at risk; Indirect inference; Particle filters (search for similar items in EconPapers)
JEL-codes: C01 C13 C15 C53 C58 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Related works:
Working Paper: Through the Looking Glass: Indirect Inference via Simple Equilibria (2015)
Working Paper: Through the Looking Glass: Indirect Inference via Simple Equilibria (2014)
Working Paper: Through the Looking Glass: Indirect Inference via Simple Equilibria (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:185:y:2015:i:2:p:343-358

DOI: 10.1016/j.jeconom.2014.11.003

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