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Back to square one: identification issues in DSGE models

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  • Canova, Fabio
  • Sala, Luca

Abstract

We investigate identification issues in DSGE models and their consequences for parameter estimation and model evaluation when the objective function measures the distance between estimated and model-based impulse responses. Observational equivalence, partial and weak identification problems are widespread and typically produced by an ill-behaved mapping between the structural parameters and the coefficients of the solution. Different objective functions affect identification and small samples interact with parameters identification. Diagnostics to detect identification deficiencies are provided and applied to a widely used model.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7234.

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Date of creation: Mar 2009
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Handle: RePEc:cpr:ceprdp:7234

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Keywords: DSGE models; Identification; Impulse Responses; small samples.;

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