Approximation Properties of Laplace-Type Estimators

Abstract

The Laplace-type estimator (LTE) is a simulation-based alternative to the classical extremum estimator that has gained popularity in applied research. We show that even though the estimator has desirable asymptotic properties, in small samples the point estimate provided by LTE may not necessarily converge to the extremum of the sample objective function. Furthermore, we suggest a simple test to verify if the estimator converges. We illustrate these results by estimating a prototype dynamic stochastic general equilibrium model widely used in macroeconomics research.

Citation

Kormilitsina, A. and Nekipelov, D. (2012), "Approximation Properties of Laplace-Type Estimators", Balke, N., Canova, F., Milani, F. and Wynne, M.A. (Ed.) DSGE Models in Macroeconomics: Estimation, Evaluation, and New Developments (Advances in Econometrics, Vol. 28), Emerald Group Publishing Limited, Leeds, pp. 291-318. https://doi.org/10.1108/S0731-9053(2012)0000028010