Publication detail

Estimation of heuristic switching in behavioral macroeconomic models

Author(s): PhDr. Jiří Kukačka Ph.D., Stephen Sacht (Kiel University)
Type: Articles in journals with impact factor
Year: 2023
Number: 0
Published in: Journal of Economic Dynamics Control, 146, 104585, DOI
Publishing place:
Keywords: behavioral heuristics, heuristic switching model, intensity of choice, simulated maximum likelihood
JEL codes: C53, D83, E12, E32
Suggested Citation: Kukacka, J., Sacht, S. (2023). Estimation of heuristic switching in behavioral macroeconomic models. Journal of Economic Dynamics and Control, 146, 104585.
Grants: PRIMUS/19/HUM/17 2019-2021 Behavioral finance and macroeconomics: New insights for the mainstream
Abstract: This paper addresses the issue of empirical validation of macroeconomic models with behavioral heuristics and a nonlinear switching mechanism. 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 well identifies behavioral effects that remain hidden under standard econometric approaches. In the empirical application, we estimate the structural and behavioral parameters of the US economy. We are specifically able to reliably identify the intensity of choice that governs the models’ nonlinear dynamics. Our empirical results thus lay the foundation for studying monetary and fiscal policy in a behavioral macroeconomic framework.


Česká Spořitelna


Patria Finance