TY - JOUR
AU - Christiano,Lawrence J.
AU - Vigfusson,Robert J.
TI - Maximum Likelihood in the Frequency Domain: A Time to Build Example
JF - National Bureau of Economic Research Working Paper Series
VL - No. 7027
PY - 1999
Y2 - March 1999
DO - 10.3386/w7027
UR - http://www.nber.org/papers/w7027
L1 - http://www.nber.org/papers/w7027.pdf
N1 - Author contact info:
Lawrence Christiano
Department of Economics
Northwestern University
2001 Sheridan Road
Evanston, IL 60208
Tel: 847/491-8231
Fax: 847/491-7001
E-Mail: l-christiano@northwestern.edu
AB - A 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
ER -