Publication detail

Estimation of heuristic switching in behavioral macroeconomic models

Author(s): PhDr. Jiří Kukačka Ph.D., Stephen Sacht (Kiel University)
Type: Others
Year: 2021
Number: 0
ISSN / ISBN: 2193-2476
Published in: Kiel University Economics Working Paper No 2021-01, DOI
Publishing place: Kiel, Germany
Keywords: behavioral heuristics, heuristic switching model, intensity of choice, simulated maximum likelihood
JEL codes: C53, D83, E12, E32
Suggested Citation: Kukacka, J., Sacht, S. (2021). Estimation of heuristic switching in behavioral macroeconomic models. Kiel University Economics Working Paper No 2021-01.
Grants: PRIMUS/19/HUM/17 2019-2021 Behavioral finance and macroeconomics: New insights for the mainstream
Abstract: This paper offers a simulation-based method for the estimation of heuristic switching in nonlinear macroeconomic models. Heuristic switching is an important feature of modeling strategy since it uses simple decision rules of boundedly rational heterogeneous agents. The simulation study shows that the proposed simulated maximum likelihood method identifies the behavioral effects that stay hidden for standard econometric approaches. In the empirical application, we estimate the structural and behavioral parameters of the US economy. We are especially able to reliably identify the intensity of choice that governs the models’ nonlinear dynamics.

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