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On the statistical identification of DSGE models

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Author Info
Consolo, Agostino
Favero, Carlo A.
Paccagnini, Alessia

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Abstract

Dynamic Stochastic General Equilibrium (DSGE) models are now considered attractive by the profession not only from the theoretical perspective but also from an empirical standpoint. As a consequence of this development, methods for diagnosing the fit of these models are being proposed and implemented. In this article we illustrate how the concept of statistical identification, that was introduced and used by Spanos [Spanos, Aris, 1990. The simultaneous-equations model revisited: Statistical adequacy and identification. Journal of Econometrics 44, 87-105] to criticize traditional evaluation methods of Cowles Commission models, could be relevant for DSGE models. We conclude that the recently proposed model evaluation method, based on the DSGE-VAR([lambda]), might not satisfy the condition for statistical identification. However, our application also shows that the adoption of a FAVARÂ as a statistically identified benchmark leaves unaltered the support of the data for the DSGE model and that a DSGE-FAVAR can be an optimal forecasting model.

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Publisher Info
Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 150 (2009)
Issue (Month): 1 (May)
Pages: 99-115
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Handle: RePEc:eee:econom:v:150:y:2009:i:1:p:99-115

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Related research
Keywords: Bayesian analysis Dynamic stochastic general equilibrium model Model evaluation Statistical identification Vector autoregression Factor-augmented vector autoregression;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Carlo A. Favero, 2007. "The Econometrics of Monetary Policy: an Overview," Working Papers 329, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
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