NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Juan Rubio

Contact and additional information for this authorAll papers and publicationsWorking Papers onlyWorking Papers with publication info

Working Papers and Chapters

October 2005Convergence Properties of the Likelihood of Computed Dynamic Models
with Jesus Fernandez-Villaverde, Manuel Santos: t0315
This paper studies the econometrics of computed dynamic models. Since these models generally lack a closed-form solution, their policy functions are approximated by numerical methods. Hence, the researcher can only evaluate an approximated likelihood associated with the approximated policy function rather than the exact likelihood implied by the exact policy function. What are the consequences for inference of the use of approximated likelihoods? First, we find conditions under which, as the approximated policy function converges to the exact policy, the approximated likelihood also converges to the exact likelihood. Second, we show that second order approximation errors in the policy function, which almost always are ignored by researchers, have first order effects on the likelihood funct...

Contact and additional information for this authorAll papers and publicationsWorking Papers onlyWorking Papers with publication info

 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us