Advanced Search
MyIDEAS: Login to save this paper or follow this series

Priors from DSGE Models for Dynamic Factor Analysis

Contents:

Author Info

  • Gregor Bäurle

Abstract

We propose a method to incorporate information from Dynamic Stochastic General Equilibrium (DSGE) models into Dynamic Factor Analysis. The method combines a procedure previously applied for Bayesian Vector Autoregressions and a Gibbs Sampling approach for Dynamic Factor Models. The factors in the model are rotated such that they can be interpreted as variables from a DSGE model. In contrast to standard Dynamic Factor Analysis, a direct economic interpretation of the factors is given. We evaluate the forecast performance of the model with respect to the amount of information from the DSGE model included in the estimation. We conclude that using prior information from a standard New Keynesian DSGE model improves the forecast performance. We also analyze the impact of identified monetary shocks on both the factors and selected series. The interpretation of the factors as variables from the DSGE model allows us to use an identification scheme which is directly linked to the DSGE model. The responses of the factors in our application resemble responses found using VARs. However, there are deviations from standard results when looking at the responses of specific series to common shocks.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.vwl.unibe.ch/papers/dp/dp0803.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Universitaet Bern, Departement Volkswirtschaft in its series Diskussionsschriften with number dp0803.

as in new window
Length:
Date of creation: Aug 2008
Date of revision:
Handle: RePEc:ube:dpvwib:dp0803

Contact details of provider:
Postal: Schanzeneckstr. 1, PF 8573, CH-3001 Bern
Phone: 0041 31 631 45 06
Fax: 41 31 631 37 83
Web page: http://www.vwi.unibe.ch/content/publikationen/index_eng.html
More information through EDIRC

Related research

Keywords: Dynamic Factor Model; DSGE Model; Bayesian Analysis; Forecasting; Transmission of Shocks;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Catherine Doz & Domenico Giannone & Lucrezia Reichlin, 2008. "A Quasi Maximum Likelihood Approach for Large Approximate Dynamic Factor Models," Working Papers ECARES 2008_034, ULB -- Universite Libre de Bruxelles.
  2. James H. Stock & Mark W. Watson, 2005. "Implications of Dynamic Factor Models for VAR Analysis," NBER Working Papers 11467, National Bureau of Economic Research, Inc.
  3. Boivin, J. & Giannoni, M., 2007. "DSGE Models in a Data-Rich Environment," Working papers 162, Banque de France.
  4. Giannone, Domenico & Reichlin, Lucrezia, 2006. "Does Information Help Recovering Structural Shocks from Past Observations?," CEPR Discussion Papers 5725, C.E.P.R. Discussion Papers.
  5. Domenica Giannone & Lucrezia Reichlin & Luca Sala, 2004. "VARs, Common Factors and the Empirical Validation of Equilibrium Business Cycle Models," Working Papers 258, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  6. Uhlig, Harald, 1999. "What are the Effects of Monetary Policy on Output? Results from an Agnostic Identification Procedure," CEPR Discussion Papers 2137, C.E.P.R. Discussion Papers.
  7. Peter N. Ireland, 1999. "A method for taking models to the data," Working Paper 9903, Federal Reserve Bank of Cleveland.
  8. Jon Faust, 1998. "The robustness of identified VAR conclusions about money," International Finance Discussion Papers 610, Board of Governors of the Federal Reserve System (U.S.).
  9. Thomas Lubik & Frank Schorfheide, 2002. "Testing for Indeterminacy:An Application to U.S. Monetary Policy," Economics Working Paper Archive 480, The Johns Hopkins University,Department of Economics, revised Jun 2003.
  10. Marco Del Negro & Frank Schorfheide, 2004. "Priors from General Equilibrium Models for VARS," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 643-673, 05.
  11. Forni, Mario & Lippi, Marco & Reichlin, Lucrezia, 2003. "Opening the Black Box: Structural Factor Models versus Structural VARs," CEPR Discussion Papers 4133, C.E.P.R. Discussion Papers.
  12. Del Negro, Marco & Schorfheide, Frank & Smets, Frank & Wouters, Raf, 2005. "On the fit and forecasting performance of New-Keynesian models," Working Paper Series 0491, European Central Bank.
  13. Canova, Fabio, 2002. "Validating Monetary DSGE Models through VARs," CEPR Discussion Papers 3442, C.E.P.R. Discussion Papers.
  14. Sargent, Thomas J, 1989. "Two Models of Measurements and the Investment Accelerator," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 251-87, April.
  15. Sims, Christopher A, 2002. "Solving Linear Rational Expectations Models," Computational Economics, Society for Computational Economics, vol. 20(1-2), pages 1-20, October.
  16. Domenico Giannone & Lucrezia Reichlin, 2006. "Does information help recovering structural shocks from past observations?," ULB Institutional Repository 2013/10125, ULB -- Universite Libre de Bruxelles.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ube:dpvwib:dp0803. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Silvia Glusstein-Gerber).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.