01775cam a22002537 4500001000600000003000500006005001700011008004100028100002800069245014400097260006600241490004100307500001600348520058800364530006100952538007201013538003601085690012901121690009101250700002501341710004201366830007601408856003701484w7027NBER20140425022639.0140425s1999 mau||||fs|||| 000 0 eng d1 aChristiano, Lawrence J.10aMaximum Likelihood in the Frequency Domainh[electronic resource]:bA Time to Build Example /cLawrence J. Christiano, Robert J. Vigfusson. aCambridge, Mass.bNational Bureau of Economic Researchc1999.1 aNBER working paper seriesvno. w7027 aMarch 1999.3 aA well known result is that the Gaussian log-likelihood can be expressed as the sum over different frequency components. This implies that the likelihood ratio statistic has a similar linear decomposition. We exploit these observations to devise diagnostic methods that are useful for interpreting maximum likelihood parameter estimates and likelihood ratio tests. We apply the methods to the estimation and testing of two real business cycle models. The standard real business cycle model is rejected in favor of an alternative in which capital investment requires a planning period aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web. 7aE2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy2Journal of Economic Literature class. 7aE22 - Capital • Investment • Capacity2Journal of Economic Literature class.1 aVigfusson, Robert J.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w7027.4 uhttp://www.nber.org/papers/w7027