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Identification Problems in SDGE Models with an illustration to a small Macro model

Author

Listed:
  • Andreas Beyer

    (DG- Research European Central Bank)

  • Roger E.A. Farmer

    (UCLA)

Abstract

We study identification in a class of linear rational expectations models. For any given exactly identified model, we provide an algorithm that generates a class of equivalent models that have the same reduced form. We use our algorithm to show that a model proposed by Jess Benhabib and Roger Farmer is observationally equivalent to the standard new-Keynesian model when observed over a single policy regime. However, the two models have different implications for the design of an optimal policy rule

Suggested Citation

  • Andreas Beyer & Roger E.A. Farmer, 2006. "Identification Problems in SDGE Models with an illustration to a small Macro model," Computing in Economics and Finance 2006 81, Society for Computational Economics.
    • Handle: RePEc:sce:scecfa:81
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    Citations

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    Cited by:

    1. Stephen Morris, 2014. "The Statistical Implications of Common Identifying Restrictions for DSGE Models," 2014 Meeting Papers 738, Society for Economic Dynamics.
    2. Alexander Kriwoluzky, 2008. "Matching Theory and Data: Bayesian Vector Autoregression and Dynamic Stochastic General Equilibrium Models," SFB 649 Discussion Papers SFB649DP2008-060, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    3. Morris, Stephen D., 2020. "Is the Taylor principle still valid when rates are low?," Journal of Macroeconomics, Elsevier, vol. 64(C).

    More about this item

    Keywords

    Identification; SDGE models;

    JEL classification:

    • C39 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Other
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies

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