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Evidence on Features of a DSGE Business Cycle Model from Bayesian Model Averaging

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Author Info

  • Rodney Strachan

    (Australian National University)

  • Herman K. van Dijk

    (Erasmus University Rotterdam, and VU University Amsterdam.)

Abstract

The empirical support for features of a Dynamic Stochastic General Equilibrium model with two technology shocks is valuated using Bayesian model averaging over vector autoregressions. The model features include equilibria, restrictions on long-run responses, a structural break of unknown date and a range of lags and deterministicprocesses. We find support for a number of features implied by the economic model and the evidence suggests a break in the entire model structure around 1984 after which technology shocks appear to account for all stochastic trends. Business cycle volatility seems more due to investment specific technology shocks than neutraltechnology shocks.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 12-025/4.

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Date of creation: 20 Mar 2012
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Handle: RePEc:dgr:uvatin:20120025

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Web page: http://www.tinbergen.nl

Related research

Keywords: Posterior probability; Dynamic stochastic general equilibrium model; Cointegration; Model averaging; Stochastic trend; Impulse response; Vector autoregressive model;

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Cited by:
  1. Nalan Basturk & Cem Cakmakli & S. Pinar Ceyhan & Herman K. van Dijk, 2013. "Historical Developments in Bayesian Econometrics after Cowles Foundation Monographs 10, 14," Tinbergen Institute Discussion Papers 13-191/III, Tinbergen Institute.
  2. Monica Billio & Roberto Casarin & Francesco Ravazzolo & Herman K. van Dijk, 2012. "Combination schemes for turning point predictions," Working Papers 2012_15, Department of Economics, University of Venice "Ca' Foscari".

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