Aggregating Rational Expectations Models In the Presence of Unobserved Micro Heterogeneity
Details
Serval ID
serval:BIB_1A3588A321E1
Type
Report: a report published by a school or other institution, usually numbered within a series.
Publication sub-type
Working paper: Working papers contain results presented by the author. Working papers aim to stimulate discussions between scientists with interested parties, they can also be the basis to publish articles in specialized journals
Collection
Publications
Institution
Title
Aggregating Rational Expectations Models In the Presence of Unobserved Micro Heterogeneity
Institution details
Swiss Finance Institute
Address
Switzerland
Issued date
08/2009
Number
09-30
Genre
Research Paper
Language
english
Abstract
Our paper addresses the correction of the aggregation bias in linear rational expectations models
when there is some unobserved micro-parameter heterogeneity and only macro data are available. Starting from Lewbel (1994), we propose two new consistent estimators, which rely on a flexible parametric specification of the cross-sectional parameter distributions and account for
the dependence across coefficients inherent in such models. A Monte-Carlo study reveals that
the finite-sample and asymptotic properties of the proposed estimators correct the aggregation
bias found with the maximum-likelihood and generalized-method-of-moments approaches. As a
by-product, we can also infer the cross-sectional distribution of the parameters. Finally, we re-
assess the empirical evidence about the New Keynesian Phillips curve and explain the apparent
discrepancy between micro- and macro-based estimates of the average persistence of inflation
when there is some unobserved micro-parameter heterogeneity and only macro data are available. Starting from Lewbel (1994), we propose two new consistent estimators, which rely on a flexible parametric specification of the cross-sectional parameter distributions and account for
the dependence across coefficients inherent in such models. A Monte-Carlo study reveals that
the finite-sample and asymptotic properties of the proposed estimators correct the aggregation
bias found with the maximum-likelihood and generalized-method-of-moments approaches. As a
by-product, we can also infer the cross-sectional distribution of the parameters. Finally, we re-
assess the empirical evidence about the New Keynesian Phillips curve and explain the apparent
discrepancy between micro- and macro-based estimates of the average persistence of inflation
Keywords
Aggregation, Rational expectations models, Heterogeneity
Create date
03/05/2010 12:19
Last modification date
20/08/2019 12:51
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