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Likelihood evaluation of models with occasionally binding constraints
Author(s) -
CubaBorda Pablo,
Guerrieri Luca,
Iacoviello Matteo,
Zhong Molin
Publication year - 2019
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.2729
Subject(s) - focus (optics) , maximum likelihood , key (lock) , econometrics , computer science , estimation , simple (philosophy) , mathematical optimization , mathematics , statistics , economics , philosophy , physics , computer security , management , epistemology , optics
Summary Applied researchers interested in estimating key parameters of dynamic stochastic general equilibrium models face an array of choices regarding numerical solution and estimation methods. We focus on the likelihood evaluation of models with occasionally binding constraints. We document how solution approximation errors and likelihood misspecification, related to the treatment of measurement errors, can interact and compound each other.