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Maximum likelihood in the frequency domain: a time to build example

Lawrence Christiano () and Robert Vigfusson ()

No WP-99-4, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: A well known result is that the Gaussian log-likelihood can be expressed as the sum over different frequency components. This implies that the likelihood ratio statistic has a similar linear decomposition. We exploit these observations to devise diagnostic methods that are useful for interpreting maximum likelihood ratio tests. We apply the methods to the estimation and testing of two real business cycle models. The standard real business cycle model is rejected in favor of an alternative in which capital investment requires a planning period.

Keywords: Business cycles; Investments (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-ecm and nep-ets
Date: 1999
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Working Paper: Maximum likelihood in the frequency domain: a time to build example (1999) Downloads
Working Paper: Maximum Likelihood in the Frequency Domain: a Time to Build Example (1999)
Working Paper: Maximum Likelihood in the Frequency Domain: A Time to Build Example (1999) Downloads
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