Advanced Search
MyIDEAS: Login

An efficient minimum distance estimator for DSGE models

Contents:

Author Info

  • Theodoridis, Konstantinos

    ()
    (Bank of England)

Abstract

Recent studies illustrate that under some conditions dynamic stochastic general equilibrium models can be expressed as structural vector autoregressive models of infinite order. Based on this mapping and the theoretical results about vector autoregressive models of infinite order this paper proposes a minimum distance estimator that: A) matches the k-period responses of the whole vector of the observable variables described by the structural model – caused after a small perturbation to the entire vector of the structural errors – with those observed in the historical data, which have been recovered through the use of a structurally identified vector autoregressive model, and B) minimises the distance between the reduced-form error covariance matrix implied by the structural model and the one estimated in the data. This estimator encompasses those in the literature, is asymptotically consistent, normally distributed and efficient. The J-type overidentifying restrictions statistic that results from this methodology can be used for the evaluation of the structural model. Finally, this study also develops the theory of the bootstrapped version of the estimator and the statistic introduced here. Monte Carlo simulation evidences based on a medium-scale DSGE model reveal very encouraging results for the proposed estimator when it is compared against modern – Bayesian maximum likelihood – and less modern – maximum likelihood and non-efficient IR matching – DSGE estimators.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.bankofengland.co.uk/research/Documents/workingpapers/2011/wp439.pdf
File Function: Full text
Download Restriction: no

Bibliographic Info

Paper provided by Bank of England in its series Bank of England working papers with number 439.

as in new window
Length: 67 pages
Date of creation: 31 Oct 2011
Date of revision:
Handle: RePEc:boe:boeewp:0439

Contact details of provider:
Postal: Publications Group Bank of England Threadneedle Street London EC2R 8AH
Phone: +44 (0)171 601 4030
Fax: +44 (0)171 601 5196
Email:
Web page: http://www.bankofengland.co.uk/
More information through EDIRC

Related research

Keywords: Minimum distance estimation; asymptotic efficiency; DSGE model estimation and evaluation; SVAR; IRFs;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. David Altig & Lawrence J. Christiano & Martin Eichenbaum & Jesper Linde, 2010. "Firm-specific capital, nominal rigidities and the business cycle," International Finance Discussion Papers 990, Board of Governors of the Federal Reserve System (U.S.).
  2. Òscar Jordà & Sharon Kozicki, 2007. "Estimation and Inference by the Method of Projection Minimum Distance," Working Papers 07-56, Bank of Canada.
  3. �scar Jordà, 2009. "Simultaneous Confidence Regions for Impulse Responses," The Review of Economics and Statistics, MIT Press, vol. 91(3), pages 629-647, August.
  4. Lütkepohl, Helmut & Poskitt, D.S., 1991. "Estimating Orthogonal Impulse Responses via Vector Autoregressive Models," Econometric Theory, Cambridge University Press, vol. 7(04), pages 487-496, December.
  5. Atsushi Inoue & Lutz Kilian, 2002. "Bootstrapping Smooth Functions of Slope Parameters and Innovation Variances in VAR (∞) Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 309-332, May.
  6. Philip Liu & Konstantinos Theodoridis, 2012. "DSGE Model Restrictions for Structural VAR Identification," International Journal of Central Banking, International Journal of Central Banking, vol. 8(4), pages 61-95, December.
  7. Christiano, Lawrence J. & Trabandt, Mathias & Walentin, Karl, 2010. "DSGE Models for Monetary Policy Analysis," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 7, pages 285-367 Elsevier.
  8. Lawrence J. Christiano & Mathias Trabandt & Karl Walentin, 2010. "Involuntary Unemployment and the Business Cycle," NBER Working Papers 15801, National Bureau of Economic Research, Inc.
  9. Alastair Hall & Atsushi Inoue & James M. Nason & Barbara Rossi, 2007. "Information criteria for impulse response function matching estimation of DSGE models," Working Paper 2007-10, Federal Reserve Bank of Atlanta.
  10. Chernozhukov, Victor & Hong, Han, 2003. "An MCMC approach to classical estimation," Journal of Econometrics, Elsevier, vol. 115(2), pages 293-346, August.
  11. Milani, Fabio, 2007. "Expectations, learning and macroeconomic persistence," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 2065-2082, October.
  12. Lütkepohl, Helmut, 1988. "Asymptotic Distribution of the Moving Average Coefficients of an Estimated Vector Autoregressive Process," Econometric Theory, Cambridge University Press, vol. 4(01), pages 77-85, April.
  13. Lawrence J. Christiano & Martin Eichenbaum & Robert Vigfusson, 2007. "Assessing Structural VARs," NBER Chapters, in: NBER Macroeconomics Annual 2006, Volume 21, pages 1-106 National Bureau of Economic Research, Inc.
  14. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1998. "Monetary Policy Shocks: What Have We Learned and to What End?," NBER Working Papers 6400, National Bureau of Economic Research, Inc.
  15. Nikolay Iskrev, 2009. "Local Identification in DSGE Models," Working Papers w200907, Banco de Portugal, Economics and Research Department.
  16. N. Gregory Mankiw & Ricardo Reis, 2007. "Sticky Information in General Equilibrium," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 603-613, 04-05.
  17. Feve, Patrick & Langot, Francois, 1994. "The RBC Models through Statistical Inference: An Application with French Data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 9(S), pages S11-35, Suppl. De.
  18. Ravenna, Federico, 2007. "Vector autoregressions and reduced form representations of DSGE models," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 2048-2064, October.
  19. Capie,Forrest, 2010. "The Bank of England," Cambridge Books, Cambridge University Press, number 9780521192828, October.
  20. Kuersteiner, Guido M., 2005. "Automatic Inference For Infinite Order Vector Autoregressions," Econometric Theory, Cambridge University Press, vol. 21(01), pages 85-115, February.
  21. Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-11, July.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Francesco Zanetti & Konstantinos Theodoridis, 2014. "News and Labor Market Dynamics in the Data and in Matching Models," Economics Series Working Papers 699, University of Oxford, Department of Economics.
  2. Pinter, Gabor & Theodoridis, Konstantinos & Yates, Tony, 2013. "Risk news shocks and the business cycle," Bank of England working papers 483, Bank of England.
  3. Thomai Filippeli & Konstantinos Theodoridis, 2014. "DSGE Priors for BVAR Models," Working Papers 713, Queen Mary, University of London, School of Economics and Finance.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:boe:boeewp:0439. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Publications Team).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.