A central debate in applied macroeconomics is whether statistical tools that use minimal identifying assumptions are useful for isolating promising models within a broad class. In this paper, I extend the analysis of Chari, Kehoe, and McGrattan (2005) to compare four statistical methods---structural VARs, VARMAs, unrestricted state space methods, and restricted state space methods---all applied to data from the same business cycle model. The objective is to determine which, if any, of the methods can successfully uncover moments of the underlying economy. The methods differ in the amount of a priori theory that is imposed, with structural VARs imposing minimal assumptions and restricted state space methods imposing the maximal. The moments that I focus on are those typically reported in the business cycle literature. Preliminary results show that the identifying assumptions of structural VARs, VARMAs, and unrestricted state space methods are too minimal: they cannot robustly uncover many of the moments business cycle researchers are interested in measuring.
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Paper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number
338.
Length: Date of creation: 03 Dec 2006 Date of revision: Handle: RePEc:red:sed006:338
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Find related papers by JEL classification: E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General
References listed on IDEAS 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.:
V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2006.
"Business cycle accounting,"
Staff Report
328, Federal Reserve Bank of Minneapolis.
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Other versions:
V.V. Chari & Patrick J. Kehoe & Ellen McGrattan, 2004.
"Business Cycle Accounting,"
NBER Working Papers
10351, National Bureau of Economic Research, Inc.
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V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2007.
"Business Cycle Accounting,"
Econometrica,
Econometric Society, vol. 75(3), pages 781-836, 05.
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