Resource title

Solving, estimating and selecting nonlinear dynamic models without the curse of dimensionality

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Resource description

We present a comprehensive framework for Bayesian estimation of structural nonlinear dynamic economic models on sparse grids. The Smolyak operator underlying the sparse grids approach frees global approximation from the curse of dimensionality and we apply it to a Chebyshev approximation of the model solution. The operator also eliminates the curse from Gaussian quadrature and we use it for the integrals arising from rational expectations and in three new nonlinear state space filters. The filters substantially decrease the computational burden compared to the sequential importance resampling particle filter. The posterior of the structural parameters is estimated by a new Metropolis-Hastings algorithm with mixing parallel sequences. The parallel extension improves the global maximization property of the algorithm, simplifies the choice of the innovation variances, allows for unbiased convergence diagnostics and for a simple implementation of the estimation on parallel computers. Finally, we provide all algorithms in the open source software JBendge for the solution and estimation of a general class of models.

Resource author

Viktor Winschel, Markus Kr├Ątzig

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/25260

Resource license

Adapt according to the presented license agreement and reference the original author.