Discussion Paper Details

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Title: Tractable Likelihood-Based Estimation of Non-Linear DSGE Models

Author(s): Robert Kollmann

Publication Date: August 2017

Keyword(s): Estimation of non-linear DSGE models and observation equation inversion

Programme Area(s): International Macroeconomics and Finance

Abstract: This paper presents a simple and fast maximum likelihood estimation method for non-linear DSGE models that are solved using a second- (or higher-) order accurate approximation. The method requires that the number of observables equals the number of exogenous shocks. Exogenous innovations are extracted recursively by inverting the observation equation, which allows easy computation of the likelihood function.

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Bibliographic Reference

Kollmann, R. 2017. 'Tractable Likelihood-Based Estimation of Non-Linear DSGE Models'. London, Centre for Economic Policy Research.