Advanced Search
MyIDEAS: Login to save this paper or follow this series

On the Statistical Identification of DSGE Models

Contents:

Author Info

  • Consolo, Agostino
  • Favero, Carlo A.
  • Paccagnini, Alessia

Abstract

Dynamic Stochastic General Equilibrium (DSGE) models are now considered attractive by the profession not only from the theoretical perspective but also from an empirical standpoint. As a consequence of this development, methods for diagnosing the fit of these models are being proposed and implemented. In this article we illustrate how the concept of statistical identification, that was introduced and used by Spanos(1990) to criticize traditional evaluation methods of Cowles Commission models, could be relevant for DSGE models. We conclude that the recently proposed model evaluation method, based on the DSGE-VAR(ë), might not satisfy the condition for statistical identification. However, our application also shows that the adoption of a FAVAR as a statistically identified benchmark leaves unaltered the support of the data for the DSGE model and that a DSGE-FAVAR can be an optimal forecasting model.

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.cepr.org/pubs/dps/DP7176.asp
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7176.

as in new window
Length:
Date of creation: Feb 2009
Date of revision:
Handle: RePEc:cpr:ceprdp:7176

Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information:
Email:

Related research

Keywords: Bayesian analysis; Dynamic stochastic general equilibrium model; Factor-Augmented Vector Autoregression; Model evaluation;

Other versions of this item:

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. Jes�s Fern�ndez-Villaverde & Juan F. Rubio-Ram�rez, 2007. "Estimating Macroeconomic Models: A Likelihood Approach," Review of Economic Studies, Oxford University Press, vol. 74(4), pages 1059-1087.
  2. Sungbae An & Frank Schorfheide, 2007. "Bayesian Analysis of DSGE Models," Econometric Reviews, Taylor & Francis Journals, Taylor & Francis Journals, vol. 26(2-4), pages 113-172.
  3. Jushan Bai & Serena Ng, 2000. "Determining the Number of Factors in Approximate Factor Models," Boston College Working Papers in Economics 440, Boston College Department of Economics.
  4. 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.
  5. Giannone, Domenico & Lenza, Michele & Reichlin, Lucrezia, 2007. "Explaining The Great Moderation: It Is Not The Shocks," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6600, C.E.P.R. Discussion Papers.
  6. Frank Schorfheide, 2000. "Loss function-based evaluation of DSGE models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 15(6), pages 645-670.
  7. Christopher A. Sims & Tao Zha, 2004. "Were there regime switches in U.S. monetary policy?," Working Paper, Federal Reserve Bank of Atlanta 2004-14, Federal Reserve Bank of Atlanta.
  8. Jesús Fernández-Villaverde & Juan F Rubio-Ramírez, 2007. "How Structural Are Structural Parameters?," Levine's Bibliography 843644000000000057, UCLA Department of Economics.
  9. Ben S. Bernanke & Jean Boivin & Piotr Eliasz, 2004. "Measuring the Effects of Monetary Policy: A Factor-Augmented Vector Autoregressive (FAVAR) Approach," NBER Working Papers 10220, National Bureau of Economic Research, Inc.
  10. Canova, Fabio & Sala, Luca, 2009. "Back to square one: identification issues in DSGE models," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7234, C.E.P.R. Discussion Papers.
  11. Boivin, J. & Giannoni, M., 2007. "DSGE Models in a Data-Rich Environment," Working papers, Banque de France 162, Banque de France.
  12. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, Econometric Society, vol. 48(1), pages 1-48, January.
  13. Forni, Mario & Reichlin, Lucrezia, 1995. "Let's Get Real: A Dynamic Factor Analytical Approach to Disaggregated Business Cycle," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1244, C.E.P.R. Discussion Papers.
  14. James H. Stock & Mark W. Watson, 1999. "Forecasting Inflation," NBER Working Papers 7023, National Bureau of Economic Research, Inc.
  15. Marco Del Negro & Frank Schorfheide, 2004. "Priors from General Equilibrium Models for VARS," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 643-673, 05.
  16. Alejandro Justiniano & Giorgio E. Primiceri, 2006. "The Time Varying Volatility of Macroeconomic Fluctuations," NBER Working Papers 12022, National Bureau of Economic Research, Inc.
  17. Federico Ravenna, 2005. "Vector Autoregressions and Reduced Form Representations of DSGE Models," 2005 Meeting Papers 841, Society for Economic Dynamics.
  18. John Geweke, 1999. "Using Simulation Methods for Bayesian Econometric Models," Computing in Economics and Finance 1999, Society for Computational Economics 832, Society for Computational Economics.
  19. Mario Forni & Marc Hallin & Marco Lippi & Lucrezia Reichlin, 2000. "The Generalized Dynamic-Factor Model: Identification And Estimation," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 540-554, November.
  20. Jesús Fernández-Villaverde & Juan F. Rubio-Ramirez & Thomas J. Sargent, 2005. "A,B,C's (and D's)'s for Understanding VARS," Levine's Bibliography 172782000000000096, UCLA Department of Economics.
  21. Ben S. Bernanke & Jean Boivin, 2001. "Monetary Policy in a Data-Rich Environment," NBER Working Papers 8379, National Bureau of Economic Research, Inc.
  22. Forni, Mario & Hallin, Marc & Lippi, Marco & Reichlin, Lucrezia, 2000. "Reference Cycles: The NBER Methodology Revisited," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2400, C.E.P.R. Discussion Papers.
  23. Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules And Macroeconomic Stability: Evidence And Some Theory," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 115(1), pages 147-180, February.
  24. Christopher A. Sims, 1996. "Macroeconomics and Methodology," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 105-120, Winter.
  25. Marco Del Negro & Frank Schorfheide, 2006. "How good is what you've got? DSGE-VAR as a toolkit for evaluating DSGE models," Economic Review, Federal Reserve Bank of Atlanta, issue Q 2, pages 21-37.
  26. Spanos, Aris, 1990. "The simultaneous-equations model revisited : Statistical adequacy and identification," Journal of Econometrics, Elsevier, Elsevier, vol. 44(1-2), pages 87-105.
  27. James H. Stock & Mark W. Watson, 1998. "Diffusion Indexes," NBER Working Papers 6702, National Bureau of Economic Research, Inc.
  28. Forni, Mario & Reichlin, Lucrezia, 1996. "Dynamic Common Factors in Large Cross-Sections," Empirical Economics, Springer, Springer, vol. 21(1), pages 27-42.
  29. Jarque, Carlos M. & Bera, Anil K., 1980. "Efficient tests for normality, homoscedasticity and serial independence of regression residuals," Economics Letters, Elsevier, vol. 6(3), pages 255-259.
  30. Sims, Christopher A & Zha, Tao, 1998. "Bayesian Methods for Dynamic Multivariate Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 949-68, November.
  31. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1997. "Monetary policy shocks: what have we learned and to what end?," Working Paper Series, Macroeconomic Issues WP-97-18, Federal Reserve Bank of Chicago.
  32. Sims, Christopher A., 1992. "Interpreting the macroeconomic time series facts : The effects of monetary policy," European Economic Review, Elsevier, vol. 36(5), pages 975-1000, June.
  33. Hendry, David F., 1995. "Dynamic Econometrics," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198283164, October.
  34. Giorgio E. Primiceri, 2005. "Time Varying Structural Vector Autoregressions and Monetary Policy," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 821-852.
  35. Stock, James H & Watson, Mark W, 2002. "Macroeconomic Forecasting Using Diffusion Indexes," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 20(2), pages 147-62, April.
  36. Chudik, Alexander & Pesaran, M. Hashem, 2007. "Infinite Dimensional VARs and Factor Models," IZA Discussion Papers 3206, Institute for the Study of Labor (IZA).
  37. Engle, Robert F. & Kroner, Kenneth F., 1995. "Multivariate Simultaneous Generalized ARCH," Econometric Theory, Cambridge University Press, vol. 11(01), pages 122-150, February.
  38. Sims, Christopher A, 2002. "Solving Linear Rational Expectations Models," Computational Economics, Society for Computational Economics, Society for Computational Economics, vol. 20(1-2), pages 1-20, October.
  39. Del Negro, Marco & Schorfheide, Frank & Smets, Frank & Wouters, Rafael, 2007. "On the Fit of New Keynesian Models," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 25, pages 123-143, April.
  40. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 1(1), pages 19-46, January.
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. Evren Caglar & Jagjit S. Chadha & Katsuyuki Shibayama, 2011. "Bayesian Estimation of DSGE models: Is the Workhorse Model Identified?," Studies in Economics, Department of Economics, University of Kent 1125, Department of Economics, University of Kent.
  2. Raffaella Giacomini, 2013. "The relationship between DSGE and VAR models," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies CWP21/13, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  3. Carlo A. Favero, 2007. "The Econometrics of Monetary Policy: an Overview," Working Papers 329, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  4. Christopher Reicher, 2013. "A note on the identification of dynamic economic models with generalized shock processes," Kiel Working Papers 1821, Kiel Institute for the World Economy.
  5. Rangan Gupta &  Patrick Kanda & Mampho Modise & Alessia Paccagnini, 2013. "DGSE Model-Based Forecasting of Modeled and Non-Modeled Inflation Variables in South Africa," Working Papers, University of Milano-Bicocca, Department of Economics 259, University of Milano-Bicocca, Department of Economics, revised Nov 2013.
  6. Stelios Bekiros & Alessia Paccagnini, 2013. "On the predictability of time-varying VAR and DSGE models," Empirical Economics, Springer, Springer, vol. 45(1), pages 635-664, August.
  7. Alessia Paccagnini, 2012. "Comparing Hybrid DSGE Models," Working Papers, University of Milano-Bicocca, Department of Economics 228, University of Milano-Bicocca, Department of Economics, revised Dec 2012.
  8. Paccagnini, Alessia, 2010. "DSGE Model Validation in a Bayesian Framework: an Assessment," MPRA Paper 24509, University Library of Munich, Germany.
  9. Nicholas Apergis & Christina Christou & James E. Payne, 2014. "Precious metal markets, stock markets and the macroeconomic environment: a FAVAR model approach," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 24(10), pages 691-703, May.
  10. Zhongjun Qu & Denis Tkachenko, 2010. "Identification and Frequency Domain QML Estimation of Linearized DSGE Models," Boston University - Department of Economics - Working Papers Series, Boston University - Department of Economics WP2010-053, Boston University - Department of Economics.
  11. Mehmet Balcilar & Rangan Gupta & Anandamayee Majumdar & Stephen M. Miller, 2012. "Was the Recent Downturn in US GDP Predictable?," Working Papers, University of Nevada, Las Vegas , Department of Economics 1210, University of Nevada, Las Vegas , Department of Economics.
  12. Dufour, Jean-Marie & Khalaf, Lynda & Kichian, Maral, 2010. "On the precision of Calvo parameter estimates in structural NKPC models," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 34(9), pages 1582-1595, September.
  13. Rangan Gupta & Patrick T. Kanda & Mampho P. Modise & Alessia Paccagnini, 2014. "DSGE Model-Based Forecasting of Modeled and Non-Modeled Ination Variables in South Africa," Working Papers 2014-562, Department of Research, Ipag Business School.
  14. Bekiros, Stelios D. & Paccagnini, Alessia, 2014. "Bayesian forecasting with small and medium scale factor-augmented vector autoregressive DSGE models," Computational Statistics & Data Analysis, Elsevier, Elsevier, vol. 71(C), pages 298-323.
  15. Dufour, Jean-Marie & Khalaf, Lynda & Kichian, Maral, 2013. "Identification-robust analysis of DSGE and structural macroeconomic models," Journal of Monetary Economics, Elsevier, Elsevier, vol. 60(3), pages 340-350.

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:cpr:ceprdp:7176. 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: ().

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.