Staff Report 198

On the Mechanics of Forming and Estimating Dynamic Linear Economies

Ellen R. McGrattan Consultant
Evan W. Anderson
Lars Peter Hansen
Thomas J. Sargent Consultant

Published September 1, 1995

This paper catalogues formulas that are useful for estimating dynamic linear economic models. We describe algorithms for computing equilibria of an economic model and for recursively computing a Gaussian likelihood function and its gradient with respect to parameters. We apply these methods to several example economies.

Published In: Handbook of Computational Economics (Vol. 1, 1996, pp. 171-252)

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