Efficient and robust inference of models with occasionally binding constraints
JRC Working Papers in Economics and Finance 2021/03
This paper proposes a piecewise-linear Kalman lter (PKF) to estimate DSGE models with occasionally binding constraints. The method expands the set of models suitable for nonlinear estimation. It straightforwardly handles missing data, non-singularity (more shocks than observed time series), and large-scale models. We provide several applications to highlight its efficiency and robustness compared to existing methods. Our toolkit integrates the PKF into Dynare, the most popular software in DSGE modeling.
GIOVANNINI Massimo;
PFEIFFER Philipp;
RATTO Marco;
2021-03-29
European Commission
JRC124394
https://publications.jrc.ec.europa.eu/repository/handle/JRC124394,
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