Arbeitspapier
Comparing Indirect Inference and likelihood testing: Asymptotic and small sample results
Indirect Inference has been found to have much greater power than the Likelihood Ratio in small samples for testing DSGE models. We look at asymptotic and large sample properties of these tests to understand why this might be the case. We find that the power of the LR test is undermined when reestimation of the error parameters is permitted; this offsets the effect of the falseness of structural parameters on the overall forecast error. Even when the two tests are done on a like-for-like basis Indirect Inference has more power because it uses the distribution restricted by the DSGE model being tested.
- Language
-
Englisch
- Bibliographic citation
-
Series: Cardiff Economics Working Papers ; No. E2015/8
- Classification
-
Wirtschaft
Hypothesis Testing: General
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
Model Evaluation, Validation, and Selection
- Subject
-
Indirect Inference
Likelihood Ratio
DSGE model
structural parameters
error processes
- Event
-
Geistige Schöpfung
- (who)
-
Meenagh, David
Minford, Patrick
Wickens, Michael
Xu, Yongdeng
- Event
-
Veröffentlichung
- (who)
-
Cardiff University, Cardiff Business School
- (where)
-
Cardiff
- (when)
-
2015
- Handle
- Last update
-
10.03.2025, 11:41 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Meenagh, David
- Minford, Patrick
- Wickens, Michael
- Xu, Yongdeng
- Cardiff University, Cardiff Business School
Time of origin
- 2015
Other Objects (12)
Why does Indirect Inference estimation produce less small sample bias than maximum likelihood? A note
Revisiting the great moderation using the method of indirect inference
Indirect inference: A methodological essay on its role and applications
The 'puzzles' methodology: En route to indirect inference?
Targeting moments for calibration compared with indirect inference
Testing part of a DSGE model by indirect inference
Testing macroeconomic models by indirect inference on unfiltered data
Indirect inference and small sample bias - Some recent results
Testing a DSGE model of the EU using indirect inference
Resolving the public sector wage premium puzzle by indirect inference
Comparing different data descriptors in indirect inference tests on DSGE models
Testing a model of the UK by the method of indirect inference
Why does Indirect Inference estimation produce less small sample bias than maximum likelihood? A note
Revisiting the great moderation using the method of indirect inference
Indirect inference: A methodological essay on its role and applications
The 'puzzles' methodology: En route to indirect inference?
Targeting moments for calibration compared with indirect inference
Testing part of a DSGE model by indirect inference
Testing macroeconomic models by indirect inference on unfiltered data
Indirect inference and small sample bias - Some recent results
Testing a DSGE model of the EU using indirect inference
Resolving the public sector wage premium puzzle by indirect inference
Comparing different data descriptors in indirect inference tests on DSGE models
Testing a model of the UK by the method of indirect inference
Why does Indirect Inference estimation produce less small sample bias than maximum likelihood? A note
Revisiting the great moderation using the method of indirect inference
Indirect inference: A methodological essay on its role and applications
The 'puzzles' methodology: En route to indirect inference?
Targeting moments for calibration compared with indirect inference
Testing part of a DSGE model by indirect inference
Testing macroeconomic models by indirect inference on unfiltered data
Indirect inference and small sample bias - Some recent results
Testing a DSGE model of the EU using indirect inference
Resolving the public sector wage premium puzzle by indirect inference
Comparing different data descriptors in indirect inference tests on DSGE models