Continuous-Tme Econometrics of Structural Models
-
Clifford R. Wymer
Much of economic theory, especially macro-economics and the study of commodity, financial, and other markets, relies on the use of non-linear structural models to study medium-term and long-run dynamic behaviour of an economy. Continuous-time econometrics is based on the argument that as economic systems are largely continuous they can be better represented and estimated by differential equation rather than difference equation systems. This paper reviews the development of full-information Gaussian estimators of non-linear systems which may then be extended to the estimation of models of intertemporally optimizing agents and other boundary point models, and models where the parameters of the stochastic innovation process enter the deterministic part of the model or vice versa. The long-properties of these models may be studied by calculating the Lyapunov exponents which give information on the form of the attractor the model, the dynamic stability of the model for given parameter values and whether it is structurally stable. The critical dependence of some attractors, and particularly strange attractors, on parameter values emphasizes the need for consistent, efficient estimation. A structural approach provides a rigorous alternative to using single time series to determine whether economic systems exhibit aperiodic or chaotic dynamical behavior.
©2012 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
Articles in the same Issue
- Article
- Introduction to the Current Issue
- How Much Should a Nation Save? A New Answer
- Macroeconomic Stabilization Policies in Intrinsically Unstable Macroeconomies
- Expectations Dynamics: Policy, Announcements and Limits to Dynamic Inconsistency
- Routes to Complexity Induced by Constraints in Cournot Oligopoly Games with Linear Reaction Functions
- Technological Adoption with Imperfect Markets in the Italian Economy
- The Macrodynamics of External Overborrowing and Systemic Instability in a Small Open Economy
- The Convergence of Economic Developments
- Continuous-Tme Econometrics of Structural Models
- Economic Stability and the Choice of the Target Inflation Index
Articles in the same Issue
- Article
- Introduction to the Current Issue
- How Much Should a Nation Save? A New Answer
- Macroeconomic Stabilization Policies in Intrinsically Unstable Macroeconomies
- Expectations Dynamics: Policy, Announcements and Limits to Dynamic Inconsistency
- Routes to Complexity Induced by Constraints in Cournot Oligopoly Games with Linear Reaction Functions
- Technological Adoption with Imperfect Markets in the Italian Economy
- The Macrodynamics of External Overborrowing and Systemic Instability in a Small Open Economy
- The Convergence of Economic Developments
- Continuous-Tme Econometrics of Structural Models
- Economic Stability and the Choice of the Target Inflation Index
