Staff Report 182

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Mechanics of Forming and Estimating Dynamic Linear Economies

Lars Peter Hansen
Ellen R. McGrattan - Consultant
Thomas J. Sargent - Consultant

Published September 1, 1994

This paper catalogues formulas that are useful for estimating dynamic linear economic models. We describe algorithms for computing equilibria of an economic model and for recursively computing a Gaussian likelihood function and its gradient with respect to parameters. We display an application to Rosen, Murphy, and Scheinkman's (1994) model of cattle cycles.

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