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No. 419: The Likelihood of a Continuous-time Vector Autoregressive Model

J. Roderick McCrorie , Queen Mary, University of London

October 1, 2000

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Abstract

This paper provides a method that weakens conditions under which the exact likelihood of a continuous-time vector autoregressive model can be derived. In particular, the method does not require the restrictions extant methods impose on discrete data that limit the applicability of continuous-time methods to real economic time series. The method applies generally to higher-order continuous-time systems involving mixed stock and flow data.

J.E.L classification codes: C32

Keywords:Continuous-time, Vector autoregression, Exact likelihood, Time series

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