Presentation of the paper

Identification through heterosckedasticity: a likelihood-based approach

Speaker

Emanuele Bacchiocchi

Università Milano Statale

Abstract

In this paper we show how the analysis of identification of simultaneous equations systems with different volatility regimes can be addressed in a conventional likelihood-based setup, generalizing previous works in different directions. We discuss general conditions for identification and one of the results shows that an adequate number of different levels of heteroskedasticity is sufficient to identify the parameters of the structural form without the inclusion of any kind of restriction. A FullInformation Maximum Likelihood (FIML) algorithm is discussed and the small sample performances of estimators and tests on the parameters are studied through Monte Carlo simulations. Finally, this methodology is used to investigate the relationships between sovereign bond yields for some highly indebted EU countries.

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