Advanced Search
MyIDEAS: Login

Estimating DGSE models with long memory dynamics

Contents:

Author Info

  • Gianluca, MORETTI
  • Giulio, NICOLETTI
Registered author(s):

    Abstract

    Recent literature clams that key variables such as aggregate productivity and inflation display long memory dynamics. We study the impllications of this high degree of persistence on the estimation of Dynamic Stochastic General Equilibrium (DGSE) models. We show that long memory data produce substantial bias in the deep parameter estimates when a standard Kalman Filter-MLE procedure is used. We propose a modification of the Kalman Filter procedure, we mainly augment the state space, which deals with this problem. By the means of the augmented state space we can consistently estimate the model parameters as well as produce more accurate out-of-sample forecasts compared to the standard Kalman filter.

    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://sites.uclouvain.be/econ/DP/IRES/2008-37.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Université catholique de Louvain, Département des Sciences Economiques in its series Discussion Papers (ECON - Département des Sciences Economiques) with number 2008037.

    as in new window
    Length: 37
    Date of creation: 01 Dec 2008
    Date of revision:
    Handle: RePEc:ctl:louvec:2008037

    Contact details of provider:
    Postal: Place Montesquieu 3, 1348 Louvain-la-Neuve (Belgium)
    Fax: +32 10473945
    Email:
    Web page: http://www.uclouvain.be/econ
    More information through EDIRC

    Related research

    Keywords:

    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. Gianluca Moretti, 2007. "Detecting long memory co-movements in macroeconomic time series," Temi di discussione (Economic working papers) 642, Bank of Italy, Economic Research and International Relations Area.
    2. Karim Abadir & Gabriel Talmain, 2001. "Aggregation, Persistence and Volatility in a Macromodel," Working Papers w200106, Banco de Portugal, Economics and Research Department.
    3. María Dolores Gadea & Laura Mayoral, 2006. "The Persistence of Inflation in OECD Countries: A Fractionally Integrated Approach," International Journal of Central Banking, International Journal of Central Banking, vol. 2(1), March.
    4. McGrattan, Ellen R., 1994. "The macroeconomic effects of distortionary taxation," Journal of Monetary Economics, Elsevier, vol. 33(3), pages 573-601, June.
    5. Abadir, Karim M. & Caggiano, Giovanni & Talmain, Gabriel, 2013. "Nelson–Plosser revisited: The ACF approach," Journal of Econometrics, Elsevier, vol. 175(1), pages 22-34.
    6. Abadir, Karim & Talmain, Gabriel, 2005. "Distilling co-movements from persistent macro and financial series," Working Paper Series 0525, European Central Bank.
    7. Peter N. Ireland, 1999. "A Method for Taking Models to the Data," Boston College Working Papers in Economics 421, Boston College Department of Economics.
    8. Ravenna, Federico, 2007. "Vector autoregressions and reduced form representations of DSGE models," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 2048-2064, October.
    9. Sowell, Fallaw, 1992. "Modeling long-run behavior with the fractional ARIMA model," Journal of Monetary Economics, Elsevier, vol. 29(2), pages 277-302, April.
    10. Carlos Carvalho, 2005. "Heterogeneity in Price Setting and the Real Effects of Monetary Shocks," Macroeconomics 0509017, EconWPA, revised 12 Sep 2005.
    11. Laura Mayoral, 2005. "Further evidence on the statistical properties of real GNP," Economics Working Papers 955, Department of Economics and Business, Universitat Pompeu Fabra, revised Feb 2006.
    12. Marcus J. Chambers, . "Long Memory and Aggregation in Macroeconomic Time Series," Economics Discussion Papers 437, University of Essex, Department of Economics.
    13. Francis X. Diebold & Glenn D. Rudebusch, 1988. "Long memory and persistence in aggregate output," Finance and Economics Discussion Series 7, Board of Governors of the Federal Reserve System (U.S.).
    14. Carvalho Carlos, 2006. "Heterogeneity in Price Stickiness and the Real Effects of Monetary Shocks," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(3), pages 1-58, December.
    15. Ruge-Murcia, Francisco J., 2007. "Methods to estimate dynamic stochastic general equilibrium models," Journal of Economic Dynamics and Control, Elsevier, vol. 31(8), pages 2599-2636, August.
    16. Altissimo, Filippo & Mojon, Benoit & Zaffaroni, Paolo, 2009. "Can aggregation explain the persistence of inflation?," Journal of Monetary Economics, Elsevier, vol. 56(2), pages 231-241, March.
    17. Granger, C. W. J., 1980. "Long memory relationships and the aggregation of dynamic models," Journal of Econometrics, Elsevier, vol. 14(2), pages 227-238, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    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:ctl:louvec:2008037. 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: (Anne DAVISTER-LOGIST).

    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.