Simulated Methods of Moments

[xtsong]

I found the function [param,sigma] = simulated_moments_estimation(dataset,options,parallel) for dynare.

But I don't know how to do to run the SMM estimation in dynare? Should this be include in a dynare script?

I would like to know if anyone has an example include this function.

Thanks~

[jpfeifer]

This function is experimental and not supported by us yet. If you are looking for a simulated method of moments, please have a look at the replication files for Born/Pfeifer (2014): "Risk Matters: A comment" at https://sites.google.com/site/pfeiferecon/20140525_replication_codes.zip?attredirects=0. There, we use SMM to estimate a third-order approximated model.

[xtsong]

Appreciate to your answer.

[Daniel Bendel]

As far as I understand your code right, you do not use a weighting matrix. If I want to use a weighting matrix, how do I have to change the code to insert one?

[jpfeifer]

At the last line, we have

Code: Select all

    % compute objective function
    fval=(simulated_moments-target)*(simulated_moments-target)'


Implicitly, this is

Code: Select all

    % compute objective function
    fval=(simulated_moments-target)/eye(n,n)*(simulated_moments-target)'


You would need to replace the identity in the middle with your weighting matrix, derived e.g. using a Newey-West type estimator. See Ruge-Murcia's codes for an example.