Maximum Likelihood in the Frequency Domain: a Time to Build Example

Lawrence Christiano and Robert Vigfusson

Working Papers from London School of Economics - Centre for Labour Economics

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 parameter estimates and 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: ECONOMIC MODELS; TESTS (search for similar items in EconPapers)
JEL-codes: C12 C32 C52 E10 E20 E22 (search for similar items in EconPapers)
Pages: 15 pages
Date: 1999
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Citations: View citations in EconPapers (5)

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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)
Working Paper: Maximum Likelihood in the Frequency Domain: A Time to Build Example (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:fth:lseple:9901

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