Methods for estimating continuous time rational expectations models from discrete time data
By: Lars Peter Hansen and Thomas J. Sargent
Contributors: Sargent, Thomas J.
Series: Staff report -- #59; Staff report (Federal Reserve Bank of Minneapolis. Research Department : Online) -- 59.
Publisher: Federal Reserve Bank of Minneapolis
Published: 1980
Place of publication: Minneapolis, Minn.]
Language: eng
Format: [electronic resource] /
Subjects: Time-series analysis
Description: "This paper describes methods for estimating the parameters of continuous time linear stochastic rational expectations models from discrete time observations. The economic models that we study are continuous time, multiple variable, stochastic, linear-quadratic rational expectations models. The paper shows how such continuous time models can properly be used to place restrictions on discrete time data. Various heuristic procedures for deducing the implications for discrete time data of these models, such as replacing derivatives with first differences, can sometimes give rise to very misleading conclusions about parameters. The idea is to express the restrictions imposed by the rational expectations model on the continuous time process of the observable variables. Then the likelihood function of a discrete-time sample of observations from this process is obtained.  Estimators are obtained by maximizing the likelihood function with respect to the free parameters of the continuous time model"--Federal Reserve Bank of Minneapolis web site.
Notes: Title from PDF file as viewed on 10/16/2007.

Includes bibliographical references.

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