Arbeitspapier
A note on the accuracy of Markov-chain approximations to highly persistent AR(1)-processes
This note examines the accuracy of methods that are commonly used to approximate AR(1)-processes with discrete Markov chains. The quadrature-based method suggested by Tauchen and Hussey (1991) generates excellent approximations with a small number of nodes when the autocorrelation is low or modest. This method however has problems when the autocorrelation is high, as it typically is found to be in recent empirical studies of income processes. I suggest an alternative weighting function for the Tauchen-Hussey method, and I also note that the older method suggested by Tauchen (1986) is relatively robust to high autocorrelation.
- Sprache
-
Englisch
- Erschienen in
-
Series: SSE/EFI Working Paper Series in Economics and Finance ; No. 656
- Klassifikation
-
Wirtschaft
Mathematical Methods; Programming Models; Mathematical and Simulation Modeling: General
- Thema
-
numerical methods
income processes
autoregressive process
Markovscher Prozess
Numerisches Verfahren
VAR-Modell
Theorie
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Flodén, Martin
- Ereignis
-
Veröffentlichung
- (wer)
-
Stockholm School of Economics, The Economic Research Institute (EFI)
- (wo)
-
Stockholm
- (wann)
-
2007
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Flodén, Martin
- Stockholm School of Economics, The Economic Research Institute (EFI)
Entstanden
- 2007
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