Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/231265
Authors: 
Kukacka, Jiri
Sacht, Stephen
Year of Publication: 
2021
Series/Report no.: 
Economics Working Paper No. 2021-01
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.
Subjects: 
Behavioral Heuristics
Heuristic Switching Model
Intensity of Choice
Simulated Maximum Likelihood
JEL: 
C53
D83
E12
E32
Document Type: 
Working Paper

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