System Priors: Formulating Priors about DSGE Models' Properties
AbstractThis paper proposes a novel way of formulating priors for estimating economic models. System priors are priors about the model's features and behavior as a system, such as the sacrifice ratio or the maximum duration of response of inflation to a particular shock, for instance. System priors represent a very transparent and economically meaningful way of formulating priors about parameters, without the unintended consequences of independent priors about individual parameters. System priors may complement or also substitute for independent marginal priors. The new philosophy of formulating priors is motivated, explained and illustrated using a structural model for monetary policy.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 13/257.
Date of creation: 19 Dec 2013
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-01-17 (All new papers)
- NEP-DGE-2014-01-17 (Dynamic General Equilibrium)
- NEP-ECM-2014-01-17 (Econometrics)
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