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Confronting Model Misspecification in Macroeconomics

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  • Daniel F. Waggoner
  • Tao Zha

Abstract

We confront model misspecification in macroeconomics by proposing an analytic framework for merging multiple models. This framework allows us to 1) address uncertainty about models and parameters simultaneously and 2) trace out the historical periods in which one model dominates other models. We apply the framework to a richly parameterized DSGE model and a corresponding BVAR model. The merged model, fitting the data better than both individual models, substantially alters economic inferences about the DSGE parameters and about the implied impulse responses

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Paper provided by Department of Economics, Emory University (Atlanta) in its series Emory Economics with number 1012.

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Date of creation: Nov 2010
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Handle: RePEc:emo:wp2003:1012

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Confronting Model Misspecification in Macroeconomics
    by Christian Zimmermann in NEP-DGE blog on 2011-01-06 00:58:27
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. N. Fawcett & G. Kapetanios & J. Mitchell & S. Price, 2014. "Generalised Density Forecast Combinations," CAMA Working Papers 2014-24, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  2. Kirstin Hubrich & Robert J. Tetlow, 2012. "Financial stress and economic dynamics: the transmission of crises," Finance and Economics Discussion Series 2012-82, Board of Governors of the Federal Reserve System (U.S.).
  3. Shaun P Vahey & Elizabeth C Wakerly, 2013. "Moving towards probability forecasting," BIS Papers chapters, in: Bank for International Settlements (ed.), Globalisation and inflation dynamics in Asia and the Pacific, volume 70, pages 3-8 Bank for International Settlements.
  4. Marco Del Negro & Frank Schorfheide, 2012. "DSGE model-based forecasting," Staff Reports 554, Federal Reserve Bank of New York.
  5. Amisano, Gianni & Geweke, John, 2013. "Prediction using several macroeconomic models," Working Paper Series 1537, European Central Bank.

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