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Bayesian estimation of a DSGE model with asset prices

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  • Kliem, Martin
  • Uhlig, Harald

Abstract

This paper presents a novel Bayesian method for estimating dynamic stochastic general equilibrium (DSGE) models subject to a constrained posterior distribution of the implied Sharpe ratio. We apply our methodology to a DSGE model with habit formation in consumption and leisure, using an estimate of the Sharpe ratio to construct the constraint. We show that the constrained estimation produces a quantitative model with both reasonable asset-pricing as well as business-cycle implications. --

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Bibliographic Info

Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Papers with number 37/2013.

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Date of creation: 2013
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Handle: RePEc:zbw:bubdps:372013

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Keywords: Bayesian estimation; stochastic steady-state; prior choice; Sharpe ratio;

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References

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Bayesian estimation of a DSGE model with asset prices
    by Christian Zimmermann in NEP-DGE blog on 2013-11-19 04:23:01
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Cited by:
  1. Burkhard Heer & Alfred Maussner & Bernd Süssmuth, 2013. "Cyclical Asset Returns in the Consumption and Investment Goods Sector," CESifo Working Paper Series 4364, CESifo Group Munich.

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