Simulation-based Econometric Methods

This book introduces a new generation of statistical econometrics, where the previous difficulties presented by the presence of integrals of large dimensions in the probability density functions or in the moments can be circumvented by a simulation-based approach.

Abstract

Abstract This book deals with a new generation of econometric methods leading to criterion functions without simple analytical expression. The difficulty often comes from the presence of integrals of large dimension in the probability density function or in the moments, and the idea is to circumvent this numerical difficulty by an approach based on simulation. The main methods considered are the methods of Simulated Moments, Simulated Maximum Likelihood, Simulated Pseudo‐Maximum Likelihood, Simulated Non‐Linear Least Squares, and Indirect Inference. These methods are applied to Limited Dependent Variables Models, to Financial Series, and to Switching Regime Models.