In this chapter we approach the estimation of dynamic stochastic general equilibrium models through a moments-based estimator, the empirical likelihood. We attempt to show that this inference process can be a valid alternative to maximum likelihood, which has been one of the preferred choices of the related literature to estimate these models. The empirical likelihood estimator is characterized by a simple setup and only requires knowledge about the moments of the data generating process of the model. In this context, we exploit the fact that these economies can be formulated as a set of moment conditions to infer on their parameters through this technique. For illustrational purposes, we consider a standard real business cycle model with a constant relative risk averse utility function and indivisible labor, driven by a normal technology shock.
Riscado, S. (2012), "On the Estimation of Dynamic Stochastic General Equilibrium Models: An Empirical Likelihood Approach", Balke, N., Canova, F., Milani, F. and Wynne, M. (Ed.) DSGE Models in Macroeconomics: Estimation, Evaluation, and New Developments (Advances in Econometrics, Vol. 28), Emerald Group Publishing Limited, Bingley, pp. 387-419. https://doi.org/10.1108/S0731-9053(2012)0000028012Download as .RIS
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