Robust Estimation of Finite Horizon Dynamic Economic Models
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Robust Estimation of Finite Horizon Dynamic Economic Models. / Jørgensen, Thomas Høgholm; Tô, Maxime.
I: Computational Economics, Bind 55, Nr. 2, 2020, s. 499-509.Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt
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TY - JOUR
T1 - Robust Estimation of Finite Horizon Dynamic Economic Models
AU - Jørgensen, Thomas Høgholm
AU - Tô, Maxime
PY - 2020
Y1 - 2020
N2 - We study an estimation approach that is robust to misspecifications of the dynamic economic model being estimated. Specifically, the approach allows researchers to focus on a particular sub-problem or sub-period of the optimizing agent’s finite horizon and thus alleviates the need for assumptions regarding expectation formation about the (distant) future. This is accomplished by approximating a pseudo terminal period policy- or value function non-parametrically rather than fully specifying the remaining economic environment anticipated by agents until the terminal period. We illustrate through two Monte Carlo experiments the superior robustness of the approximate estimator compared to a standard full solution estimator.
AB - We study an estimation approach that is robust to misspecifications of the dynamic economic model being estimated. Specifically, the approach allows researchers to focus on a particular sub-problem or sub-period of the optimizing agent’s finite horizon and thus alleviates the need for assumptions regarding expectation formation about the (distant) future. This is accomplished by approximating a pseudo terminal period policy- or value function non-parametrically rather than fully specifying the remaining economic environment anticipated by agents until the terminal period. We illustrate through two Monte Carlo experiments the superior robustness of the approximate estimator compared to a standard full solution estimator.
KW - C51
KW - C61
KW - C63
KW - Finite horizon dynamic programming
KW - Robust
KW - Structural estimation
U2 - 10.1007/s10614-019-09898-8
DO - 10.1007/s10614-019-09898-8
M3 - Journal article
AN - SCOPUS:85066141292
VL - 55
SP - 499
EP - 509
JO - Computational Economics
JF - Computational Economics
SN - 0927-7099
IS - 2
ER -
ID: 235595569