The Italian Continuous Time Model : Theory and Empirical Results

In this paper we give a detailed exposition of the fifth version of our model of the Italian economy, which is specified as a set of 24 nonlinear stochastic differential equations. We first examine its qualitative properties (steady state solution, structural stability, etc.). We then present the results of the estimation in continuous time, with particular emphasis on adjustment speeds and sensitivity analysis. Finally, we examine the in-sample and out-of-sample predictive performance of the model