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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)

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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File URL: http://www.bancaditalia.it/pubblicazioni/econo/temidi/td99/td354_99/td354/tema_354_99.pdf
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Bibliographic Info

Paper provided by Bank of Italy, Economic Research and International Relations Area 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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Web page: http://www.bancaditalia.it
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Related research

Keywords: Structural models; Lucas Critique;

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References

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  1. Thomas J. Sargent, 1980. "Interpreting economic time series," Staff Report 58, Federal Reserve Bank of Minneapolis.
  2. Malinvaud, Edmond, 1981. "Econometrics Faced with the Needs of Macroeconomic Policy," Econometrica, Econometric Society, vol. 49(6), pages 1363-75, November.
  3. Frank Hahn & Robert Solow, 1997. "A Critical Essay on Modern Macroeconomic Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 026258154x, January.
  4. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  5. Lars Peter Hansen & Thomas J. Sargent, 1979. "Formulating and estimating dynamic linear rational expectations models," Working Papers 127, Federal Reserve Bank of Minneapolis.
  6. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-136, Spring.
  7. Christopher A. Sims, 1982. "Policy Analysis with Econometric Models," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 13(1), pages 107-164.
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Citations

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Cited by:
  1. Siviero, S. & Terlizzese, D. & Visco, I., 1999. "Are Model-Based Inflation Forecasts Used in Monetary Policymaking? A Case Study," Papers 357, Banca Italia - Servizio di Studi.
  2. Lindé, Jesper, 2000. "Monetary Policy Analysis in Backward-Looking Models," Working Paper Series 114, Sveriges Riksbank (Central Bank of Sweden).
  3. 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.
  4. Mojon, Benoît & Angeloni, Ignazio & Terlizzese, Daniele & Kashyap, Anil K., 2003. "The output composition puzzle: a difference in the monetary transmission mechanism in the euro area and U.S," Working Paper Series 0268, European Central Bank.
  5. Fabio Fornari & Marcello Pericoli, 2000. "Stock Values and Fundamentals; Link or Irrationality?," Temi di discussione (Economic working papers) 378, Bank of Italy, Economic Research and International Relations Area.
  6. Libero Monteforte & Stefano Siviero, 2002. "The economic consequences of euro area modelling shortcuts," Temi di discussione (Economic working papers) 458, Bank of Italy, Economic Research and International Relations Area.

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