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How deep are the deep parameters?

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Author Info
Filippo Altissimo () (Bank of Italy, Economic Research Department)
Stefano Siviero () (Bank of Italy, Economic Research Department)
Daniele Terlizzese () (Bank of Italy, Economic Research Department)

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Abstract

Policy evaluation based on the estimation of dynamic stochastic general equilibrium models with aggregate macroeconomic time series rests on the assumption that a representative agent can be identified, whose behavioural parameters are independent of the policy rules. Building on earlier work by Geweke, the main goal of this paper is to show that the representative agent is in general not structural, in the sense that its estimated behavioural parameters are not policyindependent. The paper identifies two different sources of nonstructurality. The latter is shown to be a fairly general feature of optimizing representative agent rational expectations models estimated on macroeconomic data.

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Paper provided by Bank of Italy, Economic Research Department in its series Temi di discussione (Economic working papers) with number 354.

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Date of creation: Jun 1999
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Handle: RePEc:bdi:wptemi:td_354_99

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Related research
Keywords: Structural models; Lucas Critique;

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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.:
  1. Sargent, Thomas J, 1981. "Interpreting Economic Time Series," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 213-48, April. [Downloadable!] (restricted)
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  2. Frank Hahn & Robert Solow, 1997. "A Critical Essay on Modern Macroeconomic Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 026258154x, December.
  3. Christopher A. Sims, 1982. "Policy Analysis with Econometric Models," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 13(1982-1), pages 107-164. [Downloadable!]
  4. Altissimo, F. & Siviero, S. & Terlizzese, D., 1999. "How Deep Are the Deep Parameters?," Papers 354, Banca Italia - Servizio di Studi.
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  5. Marco Lippi & Paolo Zaffaroni, 1998. "Aggregation of Simple Linear Dynamics: Exact Asymptotic Results," STICERD - Econometrics Paper Series /1998/350, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE. [Downloadable!]
  6. Hansen, Lars Peter & Sargent, Thomas J., 1980. "Formulating and estimating dynamic linear rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 7-46, May. [Downloadable!] (restricted)
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  7. Malinvaud, Edmond, 1981. "Econometrics Faced with the Needs of Macroeconomic Policy," Econometrica, Econometric Society, vol. 49(6), pages 1363-75, November. [Downloadable!] (restricted)
  8. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January. [Downloadable!] (restricted)
  9. Kirman, Alan P, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-36, Spring. [Downloadable!] (restricted)
  10. Granger, C. W. J., 1980. "Long memory relationships and the aggregation of dynamic models," Journal of Econometrics, Elsevier, vol. 14(2), pages 227-238, October. [Downloadable!] (restricted)
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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. Stefano Siviero & Daniele Terlizzese & Ignazio Visco, 1999. "Are model-based inflation forecasts used in monetary policymaking? A case study," Temi di discussione (Economic working papers) 357, Bank of Italy, Economic Research Department. [Downloadable!]
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  2. Grégory Levieuge & Alexis Penot, 2008. "The Fed and the ECB: Why such an apparent difference in reactivity?," Working Papers 0804, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure. [Downloadable!]
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  3. Jesper Linde, 2002. "Monetary Policy Analysis in Backward-Looking Models," Annales d'Economie et de Statistique, ADRES, issue 67-68, pages 07, Juillet-D. [Downloadable!]
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  4. Dario Focarelli & Fabio Panetta & Carmelo Salleo, 1999. "Why Do Banks Merge?," Temi di discussione (Economic working papers) 361, Bank of Italy, Economic Research Department. [Downloadable!]
  5. Leonardo Gambacorta, 1999. "What is the Optimal Institutional Arrangement for a Monetary Union?," Temi di discussione (Economic working papers) 356, Bank of Italy, Economic Research Department. [Downloadable!]
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  6. Fabio Fornari & Marcello Pericoli, 2000. "Stock Values and Fundamentals; Link or Irrationality?," Temi di discussione (Economic working papers) 378, Bank of Italy, Economic Research Department. [Downloadable!]
    Other versions:
  7. Filippo Altissimo & Stefano Siviero & Daniele Terlizzese, 2002. "How Deep are the Deep Parameters?," Annales d'Economie et de Statistique, ADRES, issue 67-68, pages 08, Juillet-D. [Downloadable!]
    Other versions:
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