A note on the accuracy of Markov-chain approximations to highly persistent AR(1) processes

By Martin Flodén. 2008

103 citations recorded by the source corpus.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/36a772586376565f315a90a489dd05c9de0694a7

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

1. O. Attanasio
2. Hamish Low
3. R. Bottazzi
4. L. Nesheim
5. K. Kopecky
6. M. Wakefield
7. Richard M. H. Suen
8. Katja Kaufmann

In Finance

1. Hamish Low
2. R. Bottazzi
3. L. Nesheim
4. K. Kopecky
5. M. Wakefield
6. Richard M. H. Suen
7. O. Attanasio

Citations in the corpus

• Modelling the demand for housing over the life cycle (2012, methodology): “We preferred Tauchen’s method of equally spaced nodes over the quadrature based method proposed by Tauchen and Hussey (1991), because this has been shown to be more robust to very high persistence in the modelled processes (Floden, 2007).”
• Higher-order effects in asset-pricing models with long-run risks (2018, unknown): “Results are shown for the log-linearization, the projection, as well as the discretization by Tauchen and Hussey (1991) with the extension of Flodén (2008) that performs better for highly persistent processes.”
• The distribution of wealth and …scal policy in economies with …nitely lived agents (2008, unknown): “Section 4 reports on comparative statics for the bequest motive, the volatility of returns, and the degree of social mobility as measured by the correlation of rates of return on capital 15See Kesten (1973) and Goldie (1991). Gabaix (1999, Appendix 1) and Levy (2005), and Nirei-Souma (2007) have use”
• Discretization of highly persistent correlated AR(1) shocks (2010, unknown): “(1) as follows: xt = Rxti1 + Cet: ( 2 ) Multiplying the both sides of (2) by Ci1 and rearranging the outcome yields:2”
• Code files for "Finite State Markov-chain Approximations to Highly Persistent Processes" (2009, methodology): “As reported in Flodén (2008), the performance of the quadrature-based methods in approximating highly persistent processes is very sensitive to the number of points in A.”