We show that the standard procedure for estimating long-run identified vector autoregressions uses a particular estimator of the zero-frequency spectral density matrix of the data. We develop alternatives to the standard procedure and evaluate the properties of these alternative procedures using...

This paper analyzes the quality of VAR-based procedures for estimating the response of the economy to a shock. We focus on two key issues. First, do VAR-based confidence intervals accurately reflect the actual degree of sampling uncertainty associated with impulse response functions? Second,...

We describe several methods for approximating the solution to a model in which inequality constraints occasionally bind, and we compare their performance. We apply the methods to a particular model economy which satisfies two criteria: It is similar to the type of model used in actual research...

The Gaussian log-likelihood can be expressed as the sum over different frequency components. This implies that the likelihood ratio statistic has a similar linear decomposition. Exploiting these observations, the authors devise diagnostic methods that are useful for interpreting...

A presentation of an undetermined coefficients method for obtaining a linear approximation to the solution of a dynamic rational-expectations model. It shows how that solution can be used to compute the model’s implications for impulse response functions and for second moments.

We describe and compare several algorithms for approximating the solution to a model in which inequality constraints occasionally bind. Their performance is evaluated and compared using various parameterizations of the one sector growth model with irreversible investment. We develop...

Herd behavior is argued by many to be present in many markets. Existing models of such behavior have been subjected to two apparently devastating critiques. The continuous investment critique is that in the basic model herds disappear if simple zero-one investment decisions are replaced by the...