Estimating the linear-quadratic inventory model: maximum likelihood versus generalized method of moments

Article Abstract:

Generalized method of moments (GMM) and maximum likelihood (ML) estimators were compared in a benchmark linear-quadratic inventory model using Monte Carlo simulations and nondurable manufacturing data. Results showed that GMM estimates are usually biased, dynamically unstable, statistically insignificant and economically implausible, while ML estimates are often unbiased, dynamically stable, statistically significant and economically plausible. GMM asymptotic standard errors were found to be 3-15 times larger than for ML.

Distributions, Theory of (Functional analysis), Theory of distributions, Maximum likelihood estimates (Statistics), Maximum likelihood (Statistics)

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Federal Reserve interest rate targeting, rational expectations, and the term structure

Article Abstract:

The hypothesis that term structure affects future interest rates was studied through a model of interest rate targeting practiced by the Federal Reserve (Fed). Previous studies suggest that yield spreads on three-month and six-month Treasury Bills present little information on the trends of interest rates. The model, however, presents evidence that the targeting behavior of the Fed, based on rational expectations, determines various term structure outcomes.

Public Finance Activities, Federal Reserve System, Research, Management, Interest rates, United States. Federal Reserve Board, Rational expectations (Economics)

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Estimating the Euler equation for output

Article Abstract:

The output Euler equation is central to macroeconomic research and monetary policy research since the last five years. Speed and contour of the response to monetary policy actions can vary with the perceived change of behavior. The paper concludes that the maximum likelihood, by explicitly imposing constraints, provides instruments that properly center the democratic distribution on the time values.

United States, Usage, Study and teaching, Monetary policy, Macroeconomics, Lagrange equations

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