Working Paper

Generalized Spectral Estimation

Abstract: This paper provides a famework for estimating parameters in a wide class of dynamic rational expectations models. The framework recognizes that RE models are often meant to match the data only in limited ways. In particular, interest may focus on a subset of frequencies. This paper designs a frequency domain version of GMM. The estimator has several advantages over traditional GMM. Aside from allowing band-restricted estimation, it does not require making arbitrary instrument or weighting matrix choices. The framework also includes least squares, maximum likelihood, and band restricted maximum likelihood as special cases.

Keywords: Estimation; frequency domain; misspecification;

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Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Number: 1996-37

Pages: 17 pages