On the estimation of behavioral macroeconomic models via simulated maximum likelihood
Jiri Kukacka (),
Tae-Seok Jang and
No 2018-11, Economics Working Papers from Christian-Albrechts-University of Kiel, Department of Economics
In this paper, we introduce the simulated maximum likelihood method for identifying behavioral heuristics of heterogeneous agents in the baseline three-equation New Keynesian model. The method is extended to multivariate macroeconomic optimization problems, and the estimation pro-cedure is applied to empirical data sets. This approach considerably relaxes restrictive theoretical assumptions and enables a novel estimation of the intensity of choice parameter in discrete choice. In Monte Carlo simulations, we analyze the properties and behavior of the estimation method, which provides important information on the behavioral parameters of the New Keynesian model. However, the curse of dimensionality arises via a consistent downward bias for idiosyncratic shocks. Our empirical results show that the forward-looking version of both the behavioral and the rational model specifications exhibits good performance. We identify potential sources of misspecification for the hybrid version. A novel feature of our analysis is that we pin down the switching parameter for the intensity of choice for the Euro Area and US economy.
Keywords: Behavioral Heuristics; Intensity of Choice; Monte Carlo Simulations; New-Keynesian Model; Simulated Maximum Likelihood (search for similar items in EconPapers)
JEL-codes: C53 D83 E12 E32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dcm, nep-ecm, nep-mac and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:zbw:cauewp:201811
Access Statistics for this paper
More papers in Economics Working Papers from Christian-Albrechts-University of Kiel, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().