Title: Discretization of the Bergstrom-Nowman macroeconomic model
Authors: Roderick McCrorie - University of St Andrews (United Kingdom) [presenting]
Abstract: The discretization of the Bergstrom-Nowman macroeconomic model is discussed. This model represents the state-of-the-art in continuous-time macroeconometric modeling. Its estimation is facilitated by the derivation of an exact discrete analog of a linear approximation of the model about sample means. We focus on providing a compact form for the covariance matrix of the disturbance vector of this model. Each block of the covariance matrix is shown to be expressible compactly in terms of triple integrals involving the matrix exponential, which can be computed by combining submatrices of the exponential of a certain block triangular matrix. This offers dramatically simplified expressions for the Gaussian likelihood function of the model. In passing, some new results are presented on the aliasing identification problem and on the derivation of the exact discrete analog of certain, more general continuous time stochastic models.