A note on the identification of dynamic economic models with generalized shock processes
AbstractDSGE models with generalized shock processes have been a major area of research in recent years. In this paper, I show that the structural parameters governing DSGE models are not identified when the driving process behind the model follows an unrestricted VAR. This finding implies that parameter estimates derived from recent attempts to estimate DSGE models with generalized driving processes should be treated with caution, and that there exists a tradeoff between identification and the risk of model misspecification
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1821.
Length: 10 pages
Date of creation: Jan 2013
Date of revision:
Identification; DSGE models; observational equivalence; maximum likelihood;
Find related papers by JEL classification:
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- E00 - Macroeconomics and Monetary Economics - - General - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-02-16 (All new papers)
- NEP-DGE-2013-02-16 (Dynamic General Equilibrium)
- NEP-ECM-2013-02-16 (Econometrics)
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