Sequential Monte Carlo Sampling for DSGE Models
AbstractWe develop a sequential Monte Carlo (SMC) algorithm for estimating Bayesian dynamic stochastic general equilibrium (DSGE) models, wherein a particle approximation to the posterior is built iteratively through tempering the likelihood. Using three examples consisting of an artificial state-space model, the Smets and Wouters (2007) model, and Schmitt-Grohé and Uribe’s (2012) news shock model we show that the SMC algorithm is better suited for multimodal and irregular posterior distributions than the widely-used random walk Metropolis- Hastings algorithm. We find that a more diffuse prior for the Smets and Wouters (2007) model improves its marginal data density and that a slight modification of the prior for the news shock model leads to drastic changes in the posterior inference about the importance of news shocks for fluctuations in hours worked. Unlike standard Markov chain Monte Carlo (MCMC) techniques, the SMC algorithm is well suited for parallel computing.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19152.
Date of creation: Jun 2013
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- Edward P. Herbst & Frank Schorfheide, 2013. "Sequential Monte Carlo sampling for DSGE models," Finance and Economics Discussion Series 2013-43, Board of Governors of the Federal Reserve System (U.S.).
- Edward Herbst & Frank Schorfheide, 2012. "Sequential Monte Carlo sampling for DSGE models," Working Papers 12-27, Federal Reserve Bank of Philadelphia.
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-06-24 (All new papers)
- NEP-CMP-2013-06-24 (Computational Economics)
- NEP-DGE-2013-06-24 (Dynamic General Equilibrium)
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