I am trying to estimate Bansal-Yaron 2004 (JoF) equations 8 (page 1487 on the published verdion) using consumption and dividend growth rates.
I´m getting no dynamics for the stochastic volatility process (the shock is always zero as the estimated series)
Can anyone take a look at the code (attached) and tell me where I am doing a mistake?
(Note: I use dynare under linux (no excel!) so my data are in a mat file (attached). If you want to test the code please rename the data_mine.xls to data_mine.mat)
Thank you
Stefano
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Bansal Yaron estimation
by daddona » Fri Dec 05, 2014 10:42 am
- Attachments
-
data_mine.xls- data file: to test please change the extension to .mat
- (4.41 KiB) Downloaded 94 times
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- BansalYaronML_s.mod
- code
- (1003 Bytes) Downloaded 112 times
- daddona
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Re: Bansal Yaron estimation
by jpfeifer » Fri Dec 05, 2014 2:54 pm
You cannot estimate stochastic volatility processes with Dynare. The reason is that you would need a third order approximation to the model and e.g. the particle filter for estimating it. See e.g. Section "B.5 Model Solution" of the Appendix to Born/Pfeifer (2014): Policy Risk and the Business Cycle at https://sites.google.com/site/pfeiferecon/Born_Pfeifer_Policyrisk_Appendix.pdf?attredirects=0
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