Advanced Search
MyIDEAS: Login

Confronting model misspecification in macroeconomics

Contents:

Author Info

  • Daniel F. Waggoner
  • Tao Zha

Abstract

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

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://www.frbatlanta.org/documents/pubs/wp/wp1018.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 2010-18.

as in new window
Length:
Date of creation: 2010
Date of revision:
Handle: RePEc:fip:fedawp:2010-18

Contact details of provider:
Postal: 1000 Peachtree St., N.E., Atlanta, Georgia 30309
Phone: 404-521-8500
Email:
Web page: http://www.frbatlanta.org/
More information through EDIRC

Order Information:
Email:

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

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. Smets, Frank & Wouters, Raf, 2007. "Shocks and frictions in US business cycles: a Bayesian DSGE approach," Working Paper Series 0722, European Central Bank.
  2. 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.
  3. John Geweke & Gianni Amisano, 2008. "Optimal Prediction Pools," Working Paper Series 22-08, The Rimini Centre for Economic Analysis, revised Jan 2008.
  4. William A. Brock & Steven N. Durlauf & Kenneth D. West, 2003. "Policy Evaluation in Uncertain Economic Environments," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(1), pages 235-322.
  5. Marco Del Negro & Frank Schorfheide, 2005. "Monetary policy analysis with potentially misspecified models," Working Papers 06-4, Federal Reserve Bank of Philadelphia.
  6. Timothy Cogley & Thomas J. Sargent, 2005. "The conquest of US inflation: Learning and robustness to model uncertainty," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(2), pages 528-563, April.
  7. Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 2001. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," NBER Working Papers 8403, National Bureau of Economic Research, Inc.
  8. Olivier J. Blanchard & Mark W. Watson, 1987. "Are Business Cycles All Alike?," NBER Working Papers 1392, National Bureau of Economic Research, Inc.
  9. James D. Hamilton & Daniel F. Waggoner & Tao Zha, 2004. "Normalization in econometrics," Working Paper 2004-13, Federal Reserve Bank of Atlanta.
  10. 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.
  11. Christopher A. Sims & Tao Zha, 1995. "Error bands for impulse responses," Working Paper 95-6, Federal Reserve Bank of Atlanta.
  12. McCulloch, Robert E. & Tsay, Ruey S., 1994. "Bayesian Inference of Trend and Difference-Stationarity," Econometric Theory, Cambridge University Press, vol. 10(3-4), pages 596-608, August.
  13. Gordon, Robert J., 1990. "The Measurement of Durable Goods Prices," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226304557, Winter.
  14. Chib, Siddhartha, 1996. "Calculating posterior distributions and modal estimates in Markov mixture models," Journal of Econometrics, Elsevier, vol. 75(1), pages 79-97, November.
  15. Christopher A. Sims & Daniel F. Waggoner & Tao Zha, 2006. "Methods for inference in large multiple-equation Markov-switching models," Working Paper 2006-22, Federal Reserve Bank of Atlanta.
  16. Christopher A. Sims, 1986. "Are forecasting models usable for policy analysis?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-16.
  17. Sims, Christopher A., 1992. "Interpreting the macroeconomic time series facts : The effects of monetary policy," European Economic Review, Elsevier, vol. 36(5), pages 975-1000, June.
  18. Bernanke, Ben S. & Gertler, Mark & Waston, Mark, 1997. "Systematic Monetary Policy and the Effects of Oil Price Shocks," Working Papers 97-25, C.V. Starr Center for Applied Economics, New York University.
  19. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1996. "Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?," NBER Working Papers 5809, National Bureau of Economic Research, Inc.
  20. Sims, Christopher A & Zha, Tao, 1998. "Bayesian Methods for Dynamic Multivariate Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 949-68, November.
  21. Hansen, Lars Peter & Sargent, Thomas J., 2010. "Wanting Robustness in Macroeconomics," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 20, pages 1097-1157 Elsevier.
  22. Sims, Christopher A, 2002. "Solving Linear Rational Expectations Models," Computational Economics, Society for Computational Economics, vol. 20(1-2), pages 1-20, October.
  23. John Geweke, 1998. "Using simulation methods for Bayesian econometric models: inference, development, and communication," Staff Report 249, Federal Reserve Bank of Minneapolis.
  24. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1, October.
  25. Lars Peter Hansen & Thomas J. Sargent, 2001. "Acknowledging Misspecification in Macroeconomic Theory," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(3), pages 519-535, July.
  26. Zheng Liu & Daniel F. Waggoner & Tao Zha, 2011. "Sources of macroeconomic fluctuations: A regime‚Äźswitching DSGE approach," Quantitative Economics, Econometric Society, vol. 2(2), pages 251-301, 07.
  27. Eric M. Leeper & Christopher A. Sims & Tao Zha, 1996. "What Does Monetary Policy Do?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 1-78.
  28. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
  29. Christopher A. Sims & Tao Zha, 2005. "Were There Regime Switches in U.S. Monetary Policy?," Working Papers 92, Princeton University, Department of Economics, Center for Economic Policy Studies..
Full references (including those not matched with items on IDEAS)

Citations

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.
as in new window

Cited by:
  1. 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.).
  2. 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.
  3. Marco Del Negro & Frank Schorfheide, 2012. "DSGE model-based forecasting," Staff Reports 554, Federal Reserve Bank of New York.

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:fip:fedawp:2010-18. 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: (Meredith Rector).

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.