Finite state markov-chain approximations to univariate and vector autoregressions

Tauchen, George

doi:10.1016/0165-1765(86)90168-0

Cited by 1,223 publications

(797 citation statements)

References 5 publications

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“…The grid is chosen to capture al-most all movements of the income distribution F later on. 10 Given this grid, we can use Tauchen's (1986) algorithm to obtain the transition probabilities for the Markov-chain approximation of the income process in (17) :…”

Section: Numerical Aspectsmentioning

confidence: 99%

On the dynamics of interstate migration: Migration costs and self-selection

Bayer

Juessen

2012

Review of Economic Dynamics

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This paper develops a tractable dynamic microeconomic model of migration decisions that is aggregated to describe the behavior of interregional migration. Our structural approach allows us to deal with dynamic self-selection problems that arise from the endogeneity of location choice and the persistency of migration incentives. Keeping track of the distribution of migration incentives over time has important consequences, because the dynamics of this distribution in ‡uences the estimation of structural parameters, such as migration costs. For US interstate migration, we obtain a cost estimate of somewhat less than one-half of an average annual household income. This is substantially less than the migration costs estimated by previous studies. We attribute this di¤erence to the treatment of the dynamic self-selection problem.

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Section: Numerical Aspectsmentioning

confidence: 99%

On the dynamics of interstate migration: Migration costs and self-selection

Bayer

Juessen

2012

Review of Economic Dynamics

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“…As it is standard in the literature I discretize the continuous time process described in (6) as a …rst-order Markov chain with transition matrix Q using Tauchen (1986) procedure. I assume Pr fz 0 = z j jz = z i g = Q ij 0 and P j Q ij = 1 for each i = 1; : : : ; N z : The sequence of aggregate shocks A t is known with perfect foresight.…”

Section: Firmsmentioning

confidence: 99%

Capital Misallocation During the Great Recession

Nola

2016

SSRN Journal

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“…Since firms' technologies are heterogeneous, the ergodic sets for z and k differ depending on the parameters. To compute expectations over future productivity shocks, we follow Tauchen (1986). We construct an equally spaced grid with n z = 25 points for log(z j ) that spans eight standard deviations of the ergodic distribution, that is log(z j ) ∈…”

Section: Modelmentioning

confidence: 99%

Technological Heterogeneity and Corporate Investment

Dimopoulos

Sacchetto

2015

SSRN Journal

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We study a dynamic model of corporate investment with fixed and convex capital adjustment costs, and estimate the parameters of the model separately for each firm in a sample of U.S. companies. We evaluate empirically the degree of parameter heterogeneity among firms; quantify the cross-sectional distribution of capital adjustment costs; and assess the magnitude of the estimation bias when one assumes that firms are characterized by a homogeneous set of parameter values. The results show that a considerable amount of parameter heterogeneity exists across firms. Average fixed adjustment costs are 1.15% of the firm's capital, they account for the majority of total adjustment costs, and they are underestimated when assuming parameter homogeneity across firms. Adjustment costs decline with firm size, and convex adjustment costs are positively related to a firm's average merger and acquisition expenditure.JEL Classifications: D21, D92, E22, L11

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Finite state markov-chain approximations to univariate and vector autoregressions

Cited by 1,223 publications

References 5 publications

On the dynamics of interstate migration: Migration costs and self-selection

On the dynamics of interstate migration: Migration costs and self-selection

Capital Misallocation During the Great Recession

Technological Heterogeneity and Corporate Investment

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