{"product_id":"economic-modeling-and-inference-9780691120591","title":"Economic Modeling and Inference","description":"\u003cb\u003eBook Synopsis\u003c\/b\u003e\u003cbr\u003eTakes econometrics to a fresh level by demonstrating how to combine modern economic theory with the statistical inference methods to get the most out of economic data. This title draws applications from both microeconomics and macroeconomics, paying special attention to financial and labor economics.\u003cbr\u003e\u003cbr\u003e\u003cb\u003eTrade Review\u003c\/b\u003e\u003cbr\u003e\"Economic Modeling and Inference gives an excellent overview of dynamic modeling techniques in economics and fills an important gap among current textbooks. [It] is an excellent book, especially for graduate students in economics... [I]t is also a must for economists who need a refresher course in dynamic modeling ... [and] should also be on the bookshelf of practicing researchers interested in expanding the number of models used in their work.\"--Journal of the American Statistical Association \"Economic Modeling and Inference offers a technically sophisticated grounding in the structural approach to analyzing data. The book does an excellent job of illustrating the wide range of questions that the empirical dynamic programming approach can tackle by explicitly bridging economic theory and econometrics... Books such as these will undoubtedly help the structural paradigm more successfully compete in the market for applied econometric methodologies.\"--Robert M. Sauer, Journal of Economic Literature \"Overall, the book is well structured and will be useful for many different purposes, ranging from a main text for a PhD-level course to practical guidance for researchers who do empirical work based on dynamic programming models.\"--Dong-Hyuk Kim, Economic Record\u003cbr\u003e\u003cbr\u003e\u003cb\u003eTable of Contents\u003c\/b\u003e\u003cbr\u003ePreface xiii      Chapter 1: Introduction 1  1.1 Expected Utility Theory 1  1.2 Uncertainty Aversion, Ellsberg and Allais 4  1.3 Structural Versus Reduced-Form Methods 6  1.4 Exercises 7  1.5 References 8      Chapter 2: Components of a Dynamic Programming Model 9  2.1 Examples 9  2.2 Data Configurations 13  2.3 The Objective Function 16  2.4 The State Variables 17  2.5 The Control Variables 18  2.6 The Transition Distribution 19  2.7 The Curse of Dimensionality 21  2.8 The Curse of Degeneracy 22  2.9 Exercises 24  2.10 References 25      Chapter 3: Discrete States and Controls 26  3.1 Solving DP Problems: Finite Horizon 26  3.2 Solving DP Problems: Infinite Horizon 30  3.2.1 The Method of Successive Approximation 32  3.2.2 The Method of Policy Iteration 34  3.3 Identification: A Preview 35  3.4 Exercises 37  3.5 References 37      Chapter 4: Likelihood Functions for Discrete State\/Control Models 38  4.1 Likelihood with Complete Observability 38  4.2 Measurement Error 45  4.3 Imperfect Control 51  4.4 Conclusions 54  4.5 Exercises 55  4.6 References 55      Chapter 5: Random Utility Models 57  5.1 Introduction 57  5.2 The Value Function 59  5.3 A Binary Utility Shock 60  5.4 A Continuously Distributed Utility Shock 62  5.5 Choice Probabilities 65  5.6 Dynamic Continuous Random Utility 66  5.7 Exercises 69  5.8 References 70      Chapter 6: Continuous States, Discrete Controls 71  6.1 Introduction 71  6.2 Transition Distributions and Utility 73  6.3 The Value Function and Backward Recursion 74  6.4 Example: Exercising an American Option 76  6.5 Infinite Horizon: Contraction and Forward Recursion 79  6.6 Example: Optimal Stopping in Discrete Time 83  6.7 Exercises 85  6.8 References 85      Chapter 7: Econometric Framework for the Search Model 87  7.1 The Search Model 87  7.2 Likelihood: General Considerations 89  7.3 Likelihood: Specifics for Wage Data 94  7.3.1 Wage Data Alone--One Parameter 96  7.3.2 Wage Data--Two Parameters 97  7.3.3 Wage Data Alone--Offer Arrival Probability 99  7.4 Likelihood: Wage and Duration Data 100  7.4.1 Wage and Duration Data--Two Parameters 100  7.4.2 Wage and Duration Data--Three Parameters 102  7.4.3 Wage and Duration Data--Gamma Distribution 104  7.5 Exercises 107  7.6 References 108      Chapter 8: Exact Distribution Theory for the Job Search Model 109  8.1 Introduction 109  8.2 The Prototypal Search Model 110  8.3 Alternative Economic Parametrizations 115  8.4 Models for Joint Wage and Duration Data 122  8.5 Conclusion 127  8.6 Exercises 128  8.7 References 128      Chapter 9: Measurement Error in the Prototypal Job Search Model 129  9.1 Introduction 129  9.2 The Prototypal Search Model 130  9.3 The Prototypal Model with Measurement Errors 132  9.4 Characterizing the Distribution of Measurement Errors 134  9.5 Estimation in the Prototypal Model with Measurement Errors 136  9.6 Application to the SIPP Data Set 139  9.7 Conclusions 146  9.8 Exercises 146  9.9 References 147      Chapter 10: Asset Markets 148  10.1 Introduction 148  10.2 General Asset Pricing 148  10.3 The Term Structure of Interest Rates 150  10.4 Forward Contracts 154  10.5 Futures Contracts 156  10.6 Introduction to Options 160  10.7 The Binomial Method 162  10.8 Empirical Applications 166  10.8.1 Time Series Properties 167  10.8.2 Portfolio Models 174  10.8.3 Time-Varying Volatility 181  10.8.4 Term Structure Analysis 184  10.9 Exercises 191  10.10 References 191      Chapter 11: Financial Options 192  11.1 Introduction 192  11.2 Financial Option Exercise and Job Search 192  11.3 Multiple Finite-Horizon Options 194  11.4 Markov Stock Prices 196  11.5 Value Functions for American Options 199  11.6 Option Price Data 205  11.7 Testing Option Market Efficiency 208  11.8 Exercises 212  11.9 References 212      Chapter 12: Retirement 213  12.1 Introduction 213  12.2 A Simple Retirement Model 213  12.3 The Likelihood Function 216  12.4 Longitudinal Data 221  12.5 Regularizing the Likelihood 224  12.6 Generalizations 232  12.7 Alternative Models 236  12.8 Application: The Joint Retirement of Married Couples 240  12.9 Exercises 242  12.10 References 243      Chapter 13: Continuous States and Controls 244  13.1 Introduction 244  13.2 The Linear-Quadratic Model: Finite Horizon 245  13.2.1 An Application: Macroeconomic Control 247  13.2.2 Rational Expectations 248  13.3 The Linear-Quadratic Model: Infinite Horizon 249  13.3.1 Application: Macro Policy with Rational Expectations 250  13.4 Estimation of Linear-Quadratic Models 251  13.4.1 The Curse of Degeneracy 251  13.4.2 Sources of Noise 251  13.4.3 Measurement Error 253  13.4.4 Imperfect Control 253  13.4.5 Random Utility 254  13.5 The General (Non-LQ) Case 256  13.6 Smoothness: Euler Equations 260  13.7 Discussion and Examples 261  13.8 Random Utility in the General Case 264  13.9 Exercises 264  13.10 References 265      Chapter 14: Continuous-Time Models 266  14.1 Introduction 266  14.2 Optimal Stopping in Continuous Time 269  14.3 A Jump Process Application: Allocation of Time over Time 270  14.4 Dynamic Consumption and Portfolio Choice 274  14.5 Application: Changing Investment Opportunities 278  14.6 Derivatives, Hedging, and Arbitrage Pricing 281  14.7 Stochastic Volatility and Jumps 289  14.8 The Term Structure of Interest Rates in Continuous Time 298  14.9 Exercises 310  14.10 References 310      Chapter 15: Microeconomic Applications 312  15.1 Introduction 312  15.2 Bus Engine Replacement 313  15.3 Aircraft Engine Maintenance 314  15.4 Medical Treatment and Absenteeism 316  15.5 Nuclear Power Plant Operation 317  15.6 Fertility and Child Mortality 319  15.7 Costs of Price Adjustment 320  15.8 Schooling, Work, and Occupational Choice 322  15.9 Renewal of Patents 323  15.10 Marketing--Direct Mailing of Catalogs 324  15.11 Scrapping Subsidies and Automobile Purchases 326  15.12 On-the-Job Search and the Wage Distribution 327  15.13 Exercises 329  15.14 References 330      Chapter 16: Macroeconomic Applications 331  16.1 Consumption as a Random Walk 331  16.2 Consumption and Asset Returns 333  16.3 Dynamic Labor Demand 334  16.4 Time Inconsistency of Optimal Plans 336  16.5 Time to Build 338  16.6 Nonseparable Utility 339  16.7 Preferences of Monetary Authorities 341  16.8 Dynamic Labor Supply 342  16.9 Effects of U.S. Farm Subsidies 345  16.10 Exercises 346  16.11 References 346      Chapter 17: Finance Application: Futures Hedging 347  17.1 Hedging Strategies 347  17.2 Self-Financing Trading Strategies 350  17.3 Estimation 353  17.4 Exercises 359  17.5 References 359      Chapter 18: Intertemporal Asset Pricing 360  18.1 Introduction 360  18.2 Prices and Returns 361  18.3 Capital Asset Pricing Model 362  18.4 Estimation 363  18.5 A Structural Model 365  18.6 Asset Pricing Puzzles 369  18.7 Exercises 376  18.8 References 376      Chapter 19: Dynamic Equilibrium: The Search Model 377  19.1 Introduction 377  19.2 Homogeneous Equilibrium Search 378  19.3 Data Distribution and Likelihood 383  19.4 Panels with Partially Missing Observations 389  19.4.1 The Contribution of Unemployment Duration 390  19.4.2 The Contribution of Wages 390  19.4.3 The Contribution of Employment Duration 392  19.4.4 A Numerical Example 394  19.5 Geometric Information Decomposition 395  19.5.1 Destination State Information 400  19.6 Data and Summary Statistics 403  19.7 Empirical Results 406  19.8 Conclusion 414  19.9 Exercises 415  19.10 References 415      Chapter 20: Dynamic Equilibrium: Search Equilibrium Extensions 416  20.1 Introduction 416  20.2 Measurement Error in Wages 416  20.3 Heterogeneity in Productivity: The Discrete Case 420  20.4 Heterogeneity in Productivity: The Continuous Case 424  20.5 Conclusion 429  20.6 Exercises 429  20.7 References 429      Appendix: Brief Review of Statistical Theory 431  A.1 Introduction 431  A.2 Exponential Families 432  A.3 Maximum Likelihood 434  A.4 Classical Theory of Testing 437      References 441  Index 469","brand":"Princeton University Press","offers":[{"title":"Default Title","offer_id":49403735212375,"sku":"9780691120591","price":63.0,"currency_code":"GBP","in_stock":true}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/0817\/1739\/5799\/files\/9780691120591.jpg?v=1730484395","url":"https:\/\/bookcurl.com\/products\/economic-modeling-and-inference-9780691120591","provider":"Book Curl","version":"1.0","type":"link"}