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Unformatted text preview: 1 III. Linear statespace models A. Statespace representation of a dynamic system B. Kalman filter C. Using the Kalman filter D. Bayesian analysis of linear statespace models E. Solutions to linear rational expectations models F. Estimating DSGE models instantaneous utility function: U t a t b 1 1 " 5 c C t " hC t " 1 1 " 5 c " a t L 1 5 e e t 1 5 e h ´ habit persistence a t b > b a t " 1 b 1 t b 1 t b L i.i.d. N 0, @ b 2 ´ shock to intertemporal subs a t L > L a t " 1 L 1 t L ´ shock to intratemporal subs Let C t denote deviation of log C t from its steadystate value (1) C t h 1 h C t " 1 1 1 h E t C t 1 " 1 " h 1 h 5 c R t " E t = t 1 1 " h 1 h 5 c â t b " E t â t 1 b 2 capital evolution: K t K t " 1 1 " ¡ 1 " S a t I I t / I t " 1 ¢ I t S . adjustment costs a t I > I a t " 1 I 1 t I (2) K t 1 " K t " 1 Î t " 1 (3) Î t 1 1 * Î t " 1 * 1 * E t Î t 1 I 1 * Q t " * E t â t 1 I " â t I 1 * I 1/ S " Q t value of capital stock (4) Q t " R t " = t 1...
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This note was uploaded on 03/02/2012 for the course ECON 226 taught by Professor Jameshamilton during the Winter '09 term at UCSD.
 Winter '09
 JamesHamilton

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