THEORETICAL MOMENTS and MOMENTS OF SIMULATED VARIABLES


#1

Thank you, Professor Pfeifer.
What is the difference between THEORETICAL MOMENTS and MOMENTS OF SIMULATED VARIABLES? Why in your log - linearized model RBC_CME_log_lin.mod first MOMENTS OF SIMULATED VARIABLES are non-zero (THEORETICAL MOMENTS =0)?
Thank you,
Leonid


#2

Hi,

Theoretical moments correspond to the unconditional moment computed analytically (as you would do in a VAR model). Simulated moments, as the name suggests, are obtained by first simulating time series for the endogenous variables and then computing the various empirical (on artificial data) moments. Even if a theoretical expectation is exactly zero, the corresponding simulated moment can be non zero, but the gap will go to zero if the number of simulations goes to infinity (provided the model is stationary).

Best,
St├ęphane.


#3

Dear Stephane,
Thanks for help!