Measurement with Some Theory: a New Approach to Evaluate Business Cycle Models (with appendices)
AbstractWe propose a method to evaluate cyclical models which does not require knowledge of the DGP and the exact specification of the aggregate decision rules. We derive robust restrictions in a class of models; use some to identify structural shocks in the data and others to evaluate the class or contrast sub-models. The approach has good properties, even in small samples and when the likelihood is misspecified. We showhow to sort out the relevance of a certain friction (the presence of rule-of-thumb consumers) in a standard class of models.
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Bibliographic InfoPaper provided by Barcelona Graduate School of Economics in its series Working Papers with number 511.
Date of creation: Oct 2010
Date of revision:
Sign restrictions; shock identification; model validation; misspecification;
Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
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RePEc Biblio mentionsAs found on the RePEc Biblio, the curated bibliography for Economics:CitEc Project, subscribe to its RSS feed for this item.
- Schenkelberg, Heike & Watzka, Sebastian, 2013. "Real effects of quantitative easing at the zero lower bound: Structural VAR-based evidence from Japan," Journal of International Money and Finance, Elsevier, vol. 33(C), pages 327-357.
- Valcarcel, Victor J. & Wohar, Mark E., 2013. "Changes in the oil price-inflation pass-through," Journal of Economics and Business, Elsevier, vol. 68(C), pages 24-42.
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