Handbook of Computational Statistics, Vol. I, pp. 952-979, Forthcoming
29 Pages Posted: 18 Apr 2005
This chapter reviews econometric models for which statistical inference requires intensive numerical computations. A common feature of such models is that they incorporate unobserved (or latent) variables, in addition to observed ones. This often implies that the latent variables have to be integrated from the joint distribution of latent and observed variables. The implied integral is typically of high dimension and not available analytically. Simulation methods are almost always required to solve the computational issue, but they bring new problems.
The first section deals with limited dependent variable models, with a focus on multi-period discrete choice dynamic models. The second section treats the stochastic volatility model. The last section deals with finite mixture models. Illustrative applications drawn from the literature are used.
Keywords: Numerical integration, simulation, dynamic discrete choice, stochastic volatility, finire mixtures
JEL Classification: C10, C11, C15, C35
Suggested Citation: Suggested Citation