Discrete time representation of stationary and non-stationary continuous time systems

This paper derives the formulae for an exact discrete time representation c orresponding to a system of higher-order stochastic differential equations. The formulae are applicable in stationary, non-stationary and explosive sy stems and for data observed as a mixture of both stock and flow variables. Expressions are also provided for an explicit moving average representation of the disturbance vector in the discrete time model, which can be used, u nder the assumption of white noise continuous time disturbances, to derive formulae for the computation of the exact Gaussian likelihood function, (C) 1999 Elsevier Science B.V. All rights reserved.