EconPapers    
Economics at your fingertips  
 

On the estimation of Euler equations in the presence of a potential regime shift

Pentti Saikkonen and Antti Ripatti

No 6/1999, Bank of Finland Research Discussion Papers from Bank of Finland

Abstract: The concept of a peso problem is formalized in terms of a linear Euler equation and a nonlinear marginal model describing the dynamics of the exogenous driving process.It is shown that, using a threshold autoregressive model as a marginal model, it is possible to produce time-varying peso premia.A Monte Carlo method and a method based on the numerical solution of integral equations are considered as tools for computing conditional future expectations in the marginal model.A Monte Carlo study illustrates the poor performance of the generalized method of moment (GMM) estimator in small and even relatively large samples.The poor performance is particularly acute in the presence of a peso problem but is also serious in the simple linear case.

Keywords: peso problem; Euler equations; GMM; threshold autoregressive models (search for similar items in EconPapers)
Date: 1999
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/211837/1/bof-rdp1999-006.pdf (application/pdf)

Related works:
Journal Article: On the Estimation of Euler Equations in the Presence of a Potential Regime Shift (2000) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofrdp:rdp1999_006

Access Statistics for this paper

More papers in Bank of Finland Research Discussion Papers from Bank of Finland Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().

 
Page updated 2024-07-01
Handle: RePEc:zbw:bofrdp:rdp1999_006