A New Use of Importance Sampling to Reduce Computational Burden in Simulation Estimation / Daniel A. Ackerberg.

Format:

Book

Author/Creator:

Ackerberg, Daniel A.

Contributor:

National Bureau of Economic Research.

Series:

Technical Working Paper Series (National Bureau of Economic Research) no. t0273.

NBER technical working paper series no. t0273

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2001.

Summary:

Method of Simulated Moments (MSM) estimators introduced by McFadden (1989)and Pakes and Pollard (1989) are of great use to applied economists. They are relatively easy to use even for estimating very complicated economic models. One simply needs to generate simulated data according to the model and choose parameters that make moments of this simulated data as close as possible to moments of the true data. This paper uses importance sampling techniques to address a significant computational caveat regarding these MSM estimators - that often one's economic model is hard to solve. Examples include complicated equilibrium models and dynamic programming problems. We show that importance sampling can reduce he number of times a particular model needs to be solved in an estimation procedure, significantly decreasing computational burden.

Notes:

Print version record

July 2001.