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Data Revisions in the Estimation of DSGE models

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  • Miguel Casares

    ()
    (Departamento de Economía-UPNA)

  • Jesús Vázquez

    ()
    (Department FAE II, Universidad del País Vasco)

Abstract

Revisions of US macroeconomic data are not white-noise. They are persistent, correlated with real-time data, and with high variability (around 80% of volatility observed in US real-time data). Their business cycle effects are examined in an estimated DSGE model that distinguishes real-time data from final data. Both the consumption habit formation and the price indexation to lagged inflation fall significantly in the estimation. The model also shows that revision shocks of both output and inflation are expansionary because they occur when real-time published data are too low and the Fed reacts by cutting interest rates. Consumption revisions, by contrast, are countercyclical as consumption habits mirror the observed reduction in real-time consumption. Finally, revisions of the three variables explain 9.3% of changes of output in its long-run variance decomposition.

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Bibliographic Info

Paper provided by Departamento de Economía - Universidad Pública de Navarra in its series Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra with number 1104.

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Length: pages
Date of creation: 2011
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Publication status: Published in
Handle: RePEc:nav:ecupna:1104

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Keywords: data revisions; DSGE models; business cycles.;

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  1. Valentina Corradi & Andres Fernandez & Norman Swanson, 2008. "Information in the revision process of real-time datasets," Working Papers 08-27, Federal Reserve Bank of Philadelphia.
  2. Rochelle M. Edge & Michael T. Kiley & Jean-Philippe Laforte, 2009. "A comparison of forecast performance between Federal Reserve staff forecasts, simple reduced-form models, and a DSGE model," Finance and Economics Discussion Series 2009-10, Board of Governors of the Federal Reserve System (U.S.).
  3. Andrew Levin & Christopher J. Erceg & Dale W. Henderson, 1999. "Optimal Monetary Policy with Staggered Wage and Price Contracts," Computing in Economics and Finance 1999 1151, Society for Computational Economics.
  4. Ben S. Bernanke & Julio J. Rotemberg, 1997. "NBER Macroeconomics Annual 1997, Volume 12," NBER Books, National Bureau of Economic Research, Inc, number bern97-1.
  5. Edward Herbst & Frank Schorfheide, 2011. "Evaluating DSGE model forecasts of comovements," Working Papers 11-5, Federal Reserve Bank of Philadelphia.
  6. Dean Croushore & Tom Stark, 1999. "A real-time data set for macroeconomists," Working Papers 99-4, Federal Reserve Bank of Philadelphia.
  7. Ben S. Bernanke & Julio J. Rotemberg, 1997. "Editorial in "NBER Macroeconomics Annual 1997, Volume 12"," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 1-6 National Bureau of Economic Research, Inc.
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Blog mentions

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  1. Data Revisions in the Estimation of DSGE Models
    by Christian Zimmermann in NEP-DGE blog on 2012-10-28 18:50:42
  2. Data Revisions in the Estimation of DSGE Models
    by Christian Zimmermann in NEP-DGE blog on 2012-10-28 18:50:42

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