Comparing dynamic equilibrium economies to data

Jesus Fernandez-Villaverde and Juan F Rubio-Ramirez

No 2001-23, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: This paper studies the properties of the Bayesian approach to estimation and comparison of dynamic equilibrium economies. Both tasks can be performed even if the models are nonnested, misspecified, and nonlinear. First, the authors show that Bayesian methods have a classical interpretation: asymptotically the parameter point estimates converge to their pseudotrue values, and the best model under the Kullback-Leibler will have the highest posterior probability. Second, they illustrate the strong small sample behavior of the approach using a well-known application: the U.S. cattle cycle. Bayesian estimates outperform maximum likelihood results, and the proposed model is easily compared with a set of BVARs.

Keywords: Econometric; models (search for similar items in EconPapers)
Date: 2001
New Economics Papers: this item is included in nep-dge and nep-pke
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Citations: View citations in EconPapers (14)

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Related works:
Working Paper: Comparing Dynamic Equilibrium Economies to Data (2003)
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