Efficent Estimation of the Non-linear Volatility and Growth Model

Byrne, Julie and Conniffe, Denis (2009) Efficent Estimation of the Non-linear Volatility and Growth Model. Working Paper. Department of Economics Finance and Accounting. (Unpublished)

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Ramey and Ramey (1995) introduced a non-linear model relating volatility to growth. The solution of this model by generalised computer algorithms for non-linear maximum likelihood estimation encounters the usual difficulties and is, at best, tedious. We propose an algebraic solution for the model that provides fully efficient estimators and is elementary to implement as a standard ordinary least squares procedure. This eliminates issues such as the ‘guesstimation’ of initial values and multiple runs. Our approach also facilitates testing the validity of the Ramey and Ramey (1995) model. We illustrate our approach by reanalysing the R&R data, demonstrating virtually identical results.

Item Type: Monograph (Working Paper)
Keywords: Econometrics; Macroeconomics; Growth; Volatility.
Academic Unit: Faculty of Social Sciences > Economics, Finance and Accounting
Item ID: 1522
Depositing User: Ms Sandra Doherty
Date Deposited: 26 Aug 2009 16:05
Publisher: Department of Economics Finance and Accounting

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