Non-Linear DSGE Models and the Central Difference Kalman Filter

52 Pages Posted: 29 Aug 2010 Last revised: 14 Sep 2011

See all articles by Martin M. Andreasen

Martin M. Andreasen

Aarhus University; CREATES, Aarhus University

Date Written: September 14, 2011

Abstract

This paper introduces a quasi maximum likelihood (QML) approach based on the central difference Kalman filter to estimate non-linear DSGE models with potentially non-Gaussian shocks. We argue that this estimator can be expected to be consistent and asymptotically normal for DSGE models solved up to third order. These properties are verified in a Monte Carlo study for a DSGE model solved to second and third order with structural shocks that are Gaussian, Laplace distributed, or display stochastic volatility.

Keywords: Non-linear filtering, Non-Gaussian shocks, Quasi Maximum Likelihood, Stochastic volatility, Third order perturbation

JEL Classification: C13, C15, E10, E32

Suggested Citation

Andreasen, Martin M., Non-Linear DSGE Models and the Central Difference Kalman Filter (September 14, 2011). Available at SSRN: https://ssrn.com/abstract=1666294 or http://dx.doi.org/10.2139/ssrn.1666294

Martin M. Andreasen (Contact Author)

Aarhus University ( email )

Aarhus
Denmark

CREATES, Aarhus University ( email )

School of Economics and Management
Building 1322, Bartholins Alle 10
DK-8000 Aarhus C
Denmark

HOME PAGE: http://econ.au.dk/research/research-centres/creates/people/junior-fellows/martin-andreasen/

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