Labor-Market Heterogeneity, Aggregation, and the Policy-(In)variance of DSGE Model Parameters
AbstractData from a heterogeneous-agents economy with incomplete asset markets and indivisible labor supply are simulated under various scal policy regimes and an approximating representative-agent model is estimated. Preference and technology parameter estimates of the representative-agent model are not invariant to policy changes and the bias in the representative-agent model's policy predictions is large compared to predictive intervals that re ect parameter uncertainty. Since it is not always feasible to account for heterogeneity explicitly, it is important to recognize the possibility that the parameters of a highly aggregated model may not be invariant with respect to policy changes.
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Bibliographic InfoPaper provided by Yonsei University, Yonsei Economics Research Institute in its series Working papers with number 2012rwp-51.
Length: 56 pages
Date of creation: 05 Oct 2012
Date of revision:
Aggregation; DSGE Models; Fiscal Policy; Heterogeneous-Agents Economy; Policy Predictions; Representative-Agent Models;
Other versions of this item:
- Yongsung Chang & Sun-Bin Kim & Frank Schorfheide, 2011. "Labor-Market Heterogeneity, Aggregation, and the Policy-(In)variance of DSGE Model Parameters," RCER Working Papers 566, University of Rochester - Center for Economic Research (RCER).
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Labor-Market Heterogeneity, Aggregation, and the Policy-(In)variance of DSGE Model Parameters
by Christian Zimmermann in NEP-DGE blog on 2011-10-03 13:18:34
- Frank Schorfheide, 2012. "EconomicDynamics Interviews Frank Schorfheide on DSGE Model Estimation," EconomicDynamics Newsletter, Review of Economic Dynamics, vol. 13(2), April.
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