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Likelihood Evaluation of Models with Occasionally Binding Constraints

Pablo Cuba-Borda (), Luca Guerrieri (), Matteo Iacoviello and Molin Zhong

No 2019-028, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (US)

Abstract: Applied researchers interested in estimating key parameters of DSGE models face an array of choices regarding numerical solution and estimation methods. We focus on the likelihood evaluation of models with occasionally binding constraints. We document how solution approximation errors and likelihood misspecification, related to the treatment of measurement errors, can interact and compound each other.

Keywords: Measurement error; Solution error; Occasionally binding constraints; Particle filter (search for similar items in EconPapers)
JEL-codes: C32 C53 C63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-ecm and nep-ore
Date: 2019-04-19
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DOI: 10.17016/FEDS.2019.028

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