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Minimum Distance Estimation and Testing of DSGE Models from Structural VARs

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  • Fève, Patrick
  • Matheron, Julien
  • Sahuc, Jean-Guillaume

Abstract

The aim of this paper is to complement the MDE--SVAR approach when the weighting matrix is not optimal. In empirical studies, this choice is motivated by stochastic singularity or collinearity problems associated with the covariance matrix of Impulse Response Functions. Consequently, the asymptotic distribution cannot be used to test the economic model's fit. To circumvent this difficulty, we propose a simple simulation method to construct critical values for the test statistics. An empirical application with US data illustrates the proposed method.

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Paper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 09-138.

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Date of creation: Dec 2009
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Publication status: Published in Oxford Bulletin of Economics and Statistics, vol.�71, n°6, décembre 2009, p.�883-894.
Handle: RePEc:tse:wpaper:22257

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  1. Fabio Canova & Luca Sala, 2006. "Back to square one: identification issues in DSGE models," Computing in Economics and Finance 2006 196, Society for Computational Economics.
  2. Alastair Hall & Atsushi Inoue & James M. Nason & Barbara Rossi, 2010. "Information Criteria for Impulse Response Function Matching Estimation of DSGE Models," Working Papers 10-28, Duke University, Department of Economics.
  3. Gourieroux,Christian & Monfort,Alain, 1995. "Statistics and Econometric Models," Cambridge Books, Cambridge University Press, number 9780521471626.
  4. Sahuc, Jean-Guillaume & Avouyi-Dovi, Sanvi, 2009. "Comportement du banquier central en environnement incertain," Economics Papers from University Paris Dauphine 123456789/5490, Paris Dauphine University.
  5. Sbordone, Argia M, 2006. "U.S. Wage and Price Dynamics: A Limited-Information Approach," MPRA Paper 811, University Library of Munich, Germany.
  6. Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 2001. "Nominal rigidities and the dynamic effects of a shock to monetary policy," Working Paper 0107, Federal Reserve Bank of Cleveland.
  7. David E. Altig & Lawrence J. Christiano & Martin Eichenbaum & Jesper Linde, 2004. "Firm-specific capital, nominal rigidities, and the business cycle," Working Paper 0416, Federal Reserve Bank of Cleveland.
  8. David Altig & Lawrence Christiano & Martin Eichenbaum & Jesper Linde, 2005. "Online Appendix to "Firm-Specific Capital, Nominal Rigidities and the Business Cycle"," Technical Appendices 09-191, Review of Economic Dynamics.
  9. Jean Boivin & Marc P. Giannoni, 2003. "Has Monetary Policy Become More Effective?," NBER Working Papers 9459, National Bureau of Economic Research, Inc.
  10. Marc Giannoni & Michael Woodford, 2004. "Optimal Inflation-Targeting Rules," NBER Chapters, in: The Inflation-Targeting Debate, pages 93-172 National Bureau of Economic Research, Inc.
  11. Avouyi-Dovi, S. & Bardos, M. & Jardet, C. & Kendaoui, L. & Moquet , J., 2009. "Macro stress testing with a macroeconomic credit risk model: Application to the French manufacturing sector," Working papers 238, Banque de France.
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  14. Susanto Basu & John G. Fernald, 1996. "Returns to scale in U.S. production: estimates and implications," International Finance Discussion Papers 546, Board of Governors of the Federal Reserve System (U.S.).
  15. Gourieroux,Christian & Monfort,Alain, 1995. "Statistics and Econometric Models," Cambridge Books, Cambridge University Press, number 9780521477451.
  16. Gourieroux,Christian & Monfort,Alain, 1995. "Statistics and Econometric Models," Cambridge Books, Cambridge University Press, number 9780521477444.
  17. Aghion, Ph. & Askenazy, Ph. & Bourlès, R. & Cette, G. & Dromel, N., 2009. "Education, Market Rigidities and Growth," Working papers 229, Banque de France.
  18. Julio Rotemberg & Michael Woodford, 1997. "An Optimization-Based Econometric Framework for the Evaluation of Monetary Policy," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 297-361 National Bureau of Economic Research, Inc.
  19. Gourieroux,Christian & Monfort,Alain, 1995. "Statistics and Econometric Models," Cambridge Books, Cambridge University Press, number 9780521405515.
  20. Amato, Jeffery D. & Laubach, Thomas, 2003. "Estimation and control of an optimization-based model with sticky prices and wages," Journal of Economic Dynamics and Control, Elsevier, vol. 27(7), pages 1181-1215, May.
  21. Jordi Galí & Pau Rabanal, 2004. "Technology Shocks and Aggregate Fluctuations," IMF Working Papers 04/234, International Monetary Fund.
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Cited by:
  1. J. A. Carrillo, 2011. "How Well Does Sticky Information Explain the Dynamics of Inflation, Output, and Real Wages?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 11/724, Ghent University, Faculty of Economics and Business Administration.
  2. Kamber, Gunes & Millard, Stephen, 2010. "Using estimated models to assess nominal and real rigidities in the United Kingdom," Bank of England working papers 396, Bank of England.
  3. Franke, Reiner, 2013. "Competitive Moment Matching of a New-Keynesian and an Old-Keynesian Model," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79988, Verein für Socialpolitik / German Economic Association.
  4. Omotor, Douglason G. & Niringiye, Aggrey, 2011. "Optimum Currency Area and Shock Asymmetry: A Dynamic Analysis of the West African Monetary Zone (WAMZ)," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 71-82, September.
  5. Lewis, Vivien & Poilly, Céline, 2012. "Firm entry, markups and the monetary transmission mechanism," Journal of Monetary Economics, Elsevier, vol. 59(7), pages 670-685.

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