The Italian Continuous Time Model: Results of the Nonlinear Estimation

Center for Economic Studies Working Paper at University of Munich, Number 69

Posted: 18 Jul 2001

See all articles by Giancarlo Gandolfo

Giancarlo Gandolfo

Accademia dei Lincei; CESifo (Center for Economic Studies and Ifo Institute)

Pier Carlo Padoan

University of Rome I - Department of Public Economics

Giuseppe De Arcangelis

Sapienza Università di Roma

Clifford R. Wymer

Sapienza University of Rome

Date Written: October 1994

Abstract

Continuous-time econometric models (i.e., models specified as systems of stochastic differential equations) are by now well established both in theory and in practice. Several macroeconometric continuous-time models exist for various countries. Among these the Italian continuous-time model developed by Gandolfo and Padoan over the years is in its fifth version. It is a medium-term disequilibrium model of real and financial accumulation of an open economy capable of generating both long-run growth and cycles. It has been successfully used for various purposes, amongst which the determination of the exchange rate (where it has been capable of outperforming the random walk in out-of-sample forecasting experiments). Up to now, the estimates of the parameters have been obtained using a linearized version of the model. Although for simulation purposes the original nonlinear version can be (and has actually been) used, it would be highly desirable to obtain the parameter estimates through a nonlinear estimation method. Such a method has been made available recently by Clifford R. Wymer (1993a,b) through his ESCONA program. The purpose of this paper is to apply such a method to our Italian model, and to compare the results with those of the linear approximation.

JEL Classification: F00

Suggested Citation

Gandolfo, Giancarlo and Padoan, Pier Carlo and De Arcangelis, Giuseppe and Wymer, Clifford R., The Italian Continuous Time Model: Results of the Nonlinear Estimation (October 1994). Center for Economic Studies Working Paper at University of Munich, Number 69. Available at SSRN: https://ssrn.com/abstract=5826

Giancarlo Gandolfo

Accademia dei Lincei ( email )

Via della Lungara 10
Rome, 00165
Italy

HOME PAGE: http://gandolfo.org

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Pier Carlo Padoan (Contact Author)

University of Rome I - Department of Public Economics ( email )

via del Castro Laurenziano, 9
Rome, RM 00161
Italy
+39 6 49766366 (Phone)
+39 6 4462040/4461964 (Fax)

Giuseppe De Arcangelis

Sapienza Università di Roma ( email )

Dipartimento di Scienze Sociali ed Economiche
P.le Aldo Moro 5
Rome, 00185
Italy
+390649910489 (Phone)

HOME PAGE: http://https://sites.google.com/a/uniroma1.it?pli=1

Clifford R. Wymer

Sapienza University of Rome

Piazzale Aldo Moro, 5
Rome, 00185
Italy

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