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Minimum Distance Estimation and Testing of DSGE Models from Structural VARs

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  • Patrick Fève
  • Julien Matheron
  • Jean-Guillaume Sahuc

Abstract

The aim of this paper is to complement the minimum distance estimation-structural vector autoregression approach when the weighting matrix is not optimal. In empirical studies, this choice is motivated by stochastic singularity or collinearity problems associated with the covariance matrix of impulse response functions. Consequently, the asymptotic distribution cannot be used to test the economic model's fit. To circumvent this difficulty, we propose a simple simulation method to construct critical values for the test statistics. An empirical application with US data illustrates the proposed method. Copyright (c) Blackwell Publishing Ltd and the Department of Economics, University of Oxford, 2009.

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Bibliographic Info

Article provided by Department of Economics, University of Oxford in its journal Oxford Bulletin of Economics and Statistics.

Volume (Year): 71 (2009)
Issue (Month): 6 (December)
Pages: 883-894

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Handle: RePEc:bla:obuest:v:71:y:2009:i:6:p:883-894

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  1. Sanvi Avouyi-Dovi & Jean-Guillaume Sahuc, 2009. "Comportement du banquier central en environnement incertain," Revue d'économie politique, Dalloz, Dalloz, vol. 0(1), pages 119-142.
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  4. Marc P. Giannoni & Michael Woodford, 2003. "Optimal Inflation Targeting Rules," NBER Working Papers 9939, National Bureau of Economic Research, Inc.
  5. Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 2001. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," NBER Working Papers 8403, National Bureau of Economic Research, Inc.
  6. Olivier Darné & Laurent Ferrara, 2011. "Identification of Slowdowns and Accelerations for the Euro Area Economy," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 73(3), pages 335-364, 06.
  7. Hall, Alastair R. & Inoue, Atsushi & Nason, James M. & Rossi, Barbara, 2012. "Information criteria for impulse response function matching estimation of DSGE models," Journal of Econometrics, Elsevier, Elsevier, vol. 170(2), pages 499-518.
  8. Canova, Fabio & Sala, Luca, 2009. "Back to square one: identification issues in DSGE models," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7234, C.E.P.R. Discussion Papers.
  9. Bardos, Mireille & Moquet, Jeremy & Kendaoui, Ludovic & Jardet, Caroline & Avouyi-Dovi, Sanvi, 2009. "Macro stress testing with a macroeconomic credit risk model : Application to the French manufacturing sector," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/11161, Paris Dauphine University.
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  15. Jean Boivin & Marc P. Giannoni, 2003. "Has Monetary Policy Become More Effective?," NBER Working Papers 9459, National Bureau of Economic Research, Inc.
  16. Amato, Jeffery D. & Laubach, Thomas, 2003. "Estimation and control of an optimization-based model with sticky prices and wages," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 27(7), pages 1181-1215, May.
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Cited by:
  1. Carrillo, Julio A., 2012. "How well does sticky information explain the dynamics of inflation, output, and real wages?," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 36(6), pages 830-850.
  2. Güneş Kamber & Stephen Millard, 2010. "Using estimated models to assess nominal and real rigidities in the United Kingdom," Reserve Bank of New Zealand Discussion Paper Series DP2010/05, Reserve Bank of New Zealand.
  3. Franke, Reiner, 2013. "Competitive Moment Matching of a New-Keynesian and an Old-Keynesian Model," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79988, Verein für Socialpolitik / German Economic Association.
  4. Lewis, Vivien & Poilly, Céline, 2012. "Firm entry, markups and the monetary transmission mechanism," Journal of Monetary Economics, Elsevier, Elsevier, vol. 59(7), pages 670-685.
  5. Omotor, Douglason G. & Niringiye, Aggrey, 2011. "Optimum Currency Area and Shock Asymmetry: A Dynamic Analysis of the West African Monetary Zone (WAMZ)," Journal for Economic Forecasting, Institute for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 71-82, September.

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