Method to Simultaneously Determine Stock, Flow, and Parameter Values in Large Stock Flow Consistent Models
24 Pages Posted: 30 Jun 2012
Date Written: June 28, 2012
Stock ﬂow consistent macroeconomic models suffer from the lack of a coherent estimation method due to the complicated nature of the modeling process. This paper provides a candidate estimation method that determines the values of each stock and flow simultaneously by analytically solving any stock flow model, and converting the estimation into a global minimization problem in p − k dimensions. We describe the method and apply it to a canonical model using real-world data. The method estimates the parameters and flows reliably.
Keywords: instability, ﬁnance, estimation, stock flow consistent models
JEL Classification: E32, E37, E51, G33
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