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A0180
Title: Testing Goodwin with a stochastic differential approach: The United States (1948-2015) Authors:  Florent Mc Isaac - University Paris Pantheon Sorbonne (France) [presenting]
Abstract: The aim is to follow previous research in testing both Goodwin's predator-prey model and a further extension. A guideline is provided for the estimation and the backtesting strategy that can be applied to such a class of continuous-time macroeconomic model. The goal is to propose and test stochastic differential equations for Goodwin's model and one of its extension by using an estimation technique based on simulated maximum likelihood. The data considered here is that of wage share and employment rate in the United States from 1948:Q1 to 2015:Q4. Results show that models with two structural breaks and endowed with a CES production technology more accurately explains the behavior captured by this data than the Goodwin Leontief production function. These results are partially confirmed by a backtesting strategy which highlights the forecasting property of the Goodwin model on the considered data. Both the estimation and backtesting strategies can be used to assess the empirical improvement on any extension of the Goodwin model.