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Limited Information Estimation and Evaluation of DSGE Models

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Author Info
Martin Fukac
Adrian Pagan (Reserve Bank of New Zealand)

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Abstract

We advance the proposition that dynamic stochastic general equilibrium (DSGE) models should not only be estimated and evaluated with full information methods.These require that the complete system of equations be specified properly. Some limited information analysis, which focuses upon specific equations, is therefore likely to be a useful complement to full system analysis. Two major problems occur when implementing limited information methods. These are the presence of forward-looking expectations in the system as well as unobservable non-stationary variables. We present methods for dealing with both of these difficulties, and illustrate the interaction between full and limited information methods using a well known model. Classification-C13, C39, C51, C52, E39

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File URL: http://www.rbnz.govt.nz/research/discusspapers/dp08_11.pdf
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Publisher Info
Paper provided by Reserve Bank of New Zealand in its series Reserve Bank of New Zealand Discussion Paper Series with number DP2008/11.

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Length: 22 p.
Date of creation: Jul 2008
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Handle: RePEc:nzb:nzbdps:2008/11

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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.:

  1. Sbordone, Argia M, 2006. "U.S. Wage and Price Dynamics: A Limited-Information Approach," MPRA Paper 811, University Library of Munich, Germany. [Downloadable!]
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  2. Binder,M. & Pesaran,H.M., 1995. "Multivariate Rational Expectations Models and Macroeconomic Modelling: A Review and Some New Results," Cambridge Working Papers in Economics 9415, Faculty of Economics, University of Cambridge.
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  3. Brundy, James M & Jorgenson, Dale W, 1971. "Efficient Estimation of Simultaneous Equations by Instrumental Variables," The Review of Economics and Statistics, MIT Press, vol. 53(3), pages 207-24, August. [Downloadable!] (restricted)
  4. Gourieroux, C & Monfort, A & Renault, E, 1993. "Indirect Inference," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(S), pages S85-118, Suppl. De. [Downloadable!] (restricted)
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  5. Thomas Lubik & Frank Schorfheide, 2003. "Do Central Banks Respond to Exchange Rate Movements? A Structural Investigation," Economics Working Paper Archive 505, The Johns Hopkins University,Department of Economics. [Downloadable!]
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  6. McCallum, Bennett T, 1976. "Rational Expectations and the Natural Rate Hypothesis: Some Consistent Estimates," Econometrica, Econometric Society, vol. 44(1), pages 43-52, January. [Downloadable!] (restricted)
  7. Oleg Korenok & Stanislav Radchenko & Norman R. Swanson, 2006. "International Evidence on the Efficacy of new-Keynesian Models of Inflation Persistence," Working Papers 0602, VCU School of Business, Department of Economics. [Downloadable!]
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  8. Kurmann, Andre, 2007. "VAR-based estimation of Euler equations with an application to New Keynesian pricing," Journal of Economic Dynamics and Control, Elsevier, vol. 31(3), pages 767-796, March. [Downloadable!] (restricted)
  9. Pagan, Adrian, 1979. "Some consequences of viewing LIML as an iterated Aitken estimator," Economics Letters, Elsevier, vol. 3(4), pages 369-372. [Downloadable!] (restricted)
  10. James M. Brundy & Dale W. Jorgenson, 1971. "Efficient estimation of simultaneous equations by instrumental variables," Working Papers in Applied Economic Theory 3, Federal Reserve Bank of San Francisco.
  11. Singleton, Kenneth J., 1988. "Econometric issues in the analysis of equilibrium business cycle models," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 361-386. [Downloadable!] (restricted)
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  1. Mardi Dungey & Denise R Osborn, 2009. "Modelling International Linkages for Large Open Economies: US and Euro Area," Centre for Growth and Business Cycle Research Discussion Paper Series 121, Economics, The Univeristy of Manchester. [Downloadable!]
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