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Model fit and model selection

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Author Info

  • Narayana Kocherlakota

Abstract

This paper uses an example to show that a model that fits the available data perfectly may provide worse answers to policy questions than an alternative, imperfectly fitting model. The author argues that, in the context of Bayesian estimation, this result can be interpreted as being due to the use of an inappropriate prior over the parameters of shock processes. He urges the use of priors that are obtained from explicit auxiliary information, not from the desire to obtain identification.

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File URL: http://research.stlouisfed.org/publications/review/07/07/Kocherlakota.pdf
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Bibliographic Info

Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (2007)
Issue (Month): Jul ()
Pages: 349-360

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Handle: RePEc:fip:fedlrv:y:2007:i:jul:p:349-360:n:v.89no.4

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Related research

Keywords: Econometric models ; Macroeconomics;

References

References listed on IDEAS
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  1. Canova, Fabio & Sala, Luca, 2009. "Back to square one: Identification issues in DSGE models," Journal of Monetary Economics, Elsevier, vol. 56(4), pages 431-449, May.
  2. Brunner, Karl & Meltzer, Allan H., 1976. "The Phillips curve," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 1-18, January.
  3. Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 2001. "Nominal rigidities and the dynamic effects of a shock to monetary policy," Working Paper 0107, Federal Reserve Bank of Cleveland.
  4. Mark Bils & Peter J. Klenow, 2002. "Some Evidence on the Importance of Sticky Prices," NBER Working Papers 9069, National Bureau of Economic Research, Inc.
  5. Thomas Lubik & Frank Schorfheide, 2002. "Testing for Indeterminacy:An Application to U.S. Monetary Policy," Economics Working Paper Archive 480, The Johns Hopkins University,Department of Economics, revised Jun 2003.
  6. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  7. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Kocherlakota Speaks
    by Agent Continuum in Agent Continuum on 2010-05-17 18:43:50
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Fabio Canova & Matthias Paustian, 2007. "Business cycle measurement with some theory," Economics Working Papers 1203, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 2011.
  2. Lee Ohanian, 2007. "Commentary on "Model fit and model selection"," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 361-370.

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