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Policy predictions if the model doesn’t fit

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  • Marco Del Negro
  • Frank Schorfheide

Abstract

This paper uses a novel method for conducting policy analysis with potentially misspecified DSGE models (Del Negro and Schorfheide 2004) and applies it to a simple New Keynesian DSGE model. We illustrate the sensitivity of the results to assumptions on the policy invariance of model misspecifications.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 2004-38.

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Date of creation: 2004
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Handle: RePEc:fip:fedawp:2004-38

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  1. Marco Del Negro & Frank Schorfheide, 2008. "Monetary policy analysis with potentially misspecified models," Staff Reports 321, Federal Reserve Bank of New York.
  2. Del Negro, Marco & Schorfheide, Frank & Smets, Frank & Wouters, Rafael, 2005. "On the Fit and Forecasting Performance of New Keynesian Models," CEPR Discussion Papers 4848, C.E.P.R. Discussion Papers.
  3. 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.
  4. Alexei Onatski & Noah Williams, 2004. "Empirical and policy performance of a forward-looking monetary model," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
  5. Onatski, Alexei & Stock, James H., 2002. "Robust Monetary Policy Under Model Uncertainty In A Small Model Of The U.S. Economy," Macroeconomic Dynamics, Cambridge University Press, vol. 6(01), pages 85-110, February.
  6. Ingram, Beth F. & Whiteman, Charles H., 1994. "Supplanting the 'Minnesota' prior: Forecasting macroeconomic time series using real business cycle model priors," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 497-510, December.
  7. repec:cup:macdyn:v:6:y:2002:i:1:p:85-110 is not listed on IDEAS
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Cited by:
  1. William A. Brock & Steven N. Durlauf & Kenneth D. West, 2004. "Model Uncertainty and Policy Evaluation: Some Theory and Empirics," NBER Working Papers 10916, National Bureau of Economic Research, Inc.
  2. 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, vol. 34(9), pages 1582-1595, September.
  3. Andrea Carriero, 2011. "Forecasting The Yield Curve Using Priors From No‐Arbitrage Affine Term Structure Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(2), pages 425-459, 05.
  4. Marco Del Negro & Frank Schorfheide, 2008. "Monetary policy analysis with potentially misspecified models," Staff Reports 321, Federal Reserve Bank of New York.
  5. Eilev S. Jansen, 2004. "Modelling inflation in the Euro Area," Working Paper 2004/10, Norges Bank.
  6. Fabio Canova, 2007. "How much structure in empirical models?," Economics Working Papers 1054, Department of Economics and Business, Universitat Pompeu Fabra.
  7. Stephen Cole & Fabio Milani, 2014. "The Misspecification of Expectations in New Keynesian Models: A DSGE-VAR Approach," Working Papers 131407, University of California-Irvine, Department of Economics.

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