On ABCs (and Ds) of VAR representations of DSGE models
AbstractThis paper shows that the poor man's invertibility condition in Fernandez-Villaverde et al. (2007) is, in general, sufficient but not necessary for fundamentalness; that is, a violation of this condition does not necessarily imply the impossibility of recovering the structural shocks of a DSGE via a VAR. The permanent income model in Fernandez-Villaverde et al. (2007) is used to illustrate this fact. A necessary and sufficient condition for fundamentalness is formulated and its relations with the poor man's invertibility condition are discussed.
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Bibliographic InfoPaper provided by Centre for Empirical Economics and Econometrics, Department of Statistics, "Sapienza" University of Rome in its series DSS Empirical Economics and Econometrics Working Papers Series with number 2012/4.
Length: 8 pages
Date of creation: Jul 2012
Date of revision:
DSGE; VAR; invertibility; non-fundamentalness.;
Other versions of this item:
- Massimo Franchi & Paolo Paruolo, 2012. "On ABCs (and Ds) of VAR representations of DSGE models," Working Paper Series 56_12, The Rimini Centre for Economic Analysis, revised Aug 2012.
- NEP-ALL-2012-07-23 (All new papers)
- NEP-DGE-2012-07-23 (Dynamic General Equilibrium)
- NEP-ECM-2012-07-23 (Econometrics)
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.:
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