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Unformatted text preview: MIT OpenCourseWare http://ocw.mit.edu 14.384 Time Series Analysis Fall 2008 For information about citing these materials or our Terms of Use, visit: http://ocw.mit.edu/terms . Problems 1 14.384 Time Series Analysis, Fall 2007 Professor Anna Mikusheva Paul Schrimpf, scribe Novemeber 27, 2007 Lecture 22 ML & DSGE One way to estimate dynamic stochastic equlibrium (DSGE) models is by using use maximum likelihood and the Kalman filter. We have seen a few approaches to empirical macroeconomics. VARs try to make as few assumptions as possible. GMM and related methods (SMM, indirect inference) places more structure on the model. ML places yet more structure on the data. Steps : 1. Write down model: Who maximizes what? balances 2. Solve model Usually log-linearize around non-stochastic steady-state t = T ( ) t 1 + t then solve rational expectations to get model in state-space form (- where y t = z ( ) t + v t coefficients ( T ( ) and Z ( )) are functions of the structural parameters ( ), usually T () and Z () are highly nonlinear and calculated numerically 3. Write down likelihood function of structural parameters (use Kalman filter) 4. ML:4....
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lec22 - MIT OpenCourseWare http://ocw.mit.edu 14.384 Time...

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