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

Bayesian estimation of a DSGE model with asset prices

Contents:

Author Info

  • 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. --

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://econstor.eu/bitstream/10419/85251/1/770381308.pdf
Download Restriction: no

Bibliographic Info

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

as in new window
Length:
Date of creation: 2013
Date of revision:
Handle: RePEc:zbw:bubdps:372013

Contact details of provider:
Postal: Postfach 10 06 02, 60006 Frankfurt
Phone: 0 69 / 95 66 - 34 55
Fax: 0 69 / 95 66 30 77
Email:
Web page: http://www.bundesbank.de/
More information through EDIRC

Related research

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

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. Christiano, Lawrence J. & Trabandt, Mathias & Walentin, Karl, 2007. "Introducing Financial Frictions and Unemployment into a Small Open Economy Model," Working Paper Series 214, Sveriges Riksbank (Central Bank of Sweden), revised 01 Jun 2011.
  2. Fatih Guvenen, 2009. "A parsimonious macroeconomic model for asset pricing," Staff Report, Federal Reserve Bank of Minneapolis 434, Federal Reserve Bank of Minneapolis.
  3. Glenn D. Rudebusch & Eric T. Swanson, 2008. "The bond premium in a DSGE model with long-run real and nominal risks," Working Paper Research, National Bank of Belgium 143, National Bank of Belgium.
  4. John Y. Campbell & John H. Cochrane, 1999. "Explaining the Poor Performance of Consumption-Based Asset Pricing Models," NBER Working Papers 7237, National Bureau of Economic Research, Inc.
  5. Abel, A.B., 1990. "Asset Prices Under Habit Formation And Catching Up With The Joneses," Weiss Center Working Papers, Wharton School - Weiss Center for International Financial Research 1-90, Wharton School - Weiss Center for International Financial Research.
  6. Valerie A. Ramey & Neville Francis, 2007. "Measures of Per Capita Hours and their Implications for the Technology-Hours Debate," 2007 Meeting Papers, Society for Economic Dynamics 314, Society for Economic Dynamics.
  7. Harald Uhlig, 2007. "Explaining Asset Prices with External Habits and Wage Rigidities in a DSGE Model," American Economic Review, American Economic Association, American Economic Association, vol. 97(2), pages 239-243, May.
  8. John Y. Campbell & John Cochrane, 1999. "Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 107(2), pages 205-251, April.
  9. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, American Economic Association, vol. 95(1), pages 25-49, March.
  10. Lars Peter Hansen & John C. Heaton & Nan Li, 2008. "Consumption Strikes Back? Measuring Long-Run Risk," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 116(2), pages 260-302, 04.
  11. Lettau, Martin & Uhlig, Harald, 2001. "The Sharpe Ratio And Preferences: A Parametric Approach," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 5(04), pages 1-24, September.
  12. Nicolas Coeurdacier & Helene Rey & Pablo Winant, 2011. "The Risky Steady State," American Economic Review, American Economic Association, American Economic Association, vol. 101(3), pages 398-401, May.
  13. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, Elsevier, vol. 21(2-3), pages 195-232.
  14. Pistaferri, Luigi, 2002. "Anticipated and Unanticipated Wage Changes, Wage Risk, and Intertemporal Labour Supply," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3628, C.E.P.R. Discussion Papers.
  15. Lars Peter Hansen & Ravi Jagannathan, 1994. "Assessing Specification Errors in Stochastic Discount Factor Models," NBER Technical Working Papers 0153, National Bureau of Economic Research, Inc.
  16. Cochrane, John H. & Campbell, John, 1999. "By Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior," Scholarly Articles 3119444, Harvard University Department of Economics.
  17. Erik Canton, 2002. "Business cycles in a two-sector model of endogenous growth," Economic Theory, Springer, Springer, vol. 19(3), pages 477-492.
  18. Paul Gomme & B. Ravikumar & Peter Rupert, 2006. "The return to capital and the business cycle," Working Paper 0603, Federal Reserve Bank of Cleveland.
  19. Barro, Robert, 2006. "Rare Disasters and Asset Markets in the Twentieth Century," Scholarly Articles 3208215, Harvard University Department of Economics.
  20. Boldrin, Michele & Christiano, Lawrence J. & Fisher, Jonas D.M., 1997. "Habit Persistence And Asset Returns In An Exchange Economy," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 1(02), pages 312-332, June.
  21. John Y. Campbell, 1992. "Inspecting the Mechanism: An Analytical Approach to the Stochastic Growth Model," NBER Working Papers 4188, National Bureau of Economic Research, Inc.
  22. Ravi Bansal & Amir Yaron, 2004. "Risks for the Long Run: A Potential Resolution of Asset Pricing Puzzles," Journal of Finance, American Finance Association, American Finance Association, vol. 59(4), pages 1481-1509, 08.
  23. Thomas Tallarini, . "Risk-Sensitive Real Business Cycles," GSIA Working Papers, Carnegie Mellon University, Tepper School of Business 1997-35, Carnegie Mellon University, Tepper School of Business.
  24. John Geweke, 1999. "Using simulation methods for bayesian econometric models: inference, development,and communication," Econometric Reviews, Taylor & Francis Journals, Taylor & Francis Journals, vol. 18(1), pages 1-73.
  25. McCloskey, Donald N, 1983. "The Rhetoric of Economics," Journal of Economic Literature, American Economic Association, vol. 21(2), pages 481-517, June.
  26. Scholl, Almuth & Uhlig, Harald, 2008. "New evidence on the puzzles: Results from agnostic identification on monetary policy and exchange rates," Journal of International Economics, Elsevier, Elsevier, vol. 76(1), pages 1-13, September.
  27. Olivier J. Blanchard & Jordi Galí, 2005. "Real wage rigidities and the New Keynesian model," Proceedings, Board of Governors of the Federal Reserve System (U.S.), Board of Governors of the Federal Reserve System (U.S.).
  28. Francois Gourio, 2012. "Disaster Risk and Business Cycles," American Economic Review, American Economic Association, American Economic Association, vol. 102(6), pages 2734-66, October.
  29. Harald Uhlig & Lars Ljungqvist, 2000. "Tax Policy and Aggregate Demand Management under Catching Up with the Joneses," American Economic Review, American Economic Association, American Economic Association, vol. 90(3), pages 356-366, June.
  30. Michele Boldrin & Lawrence J. Christiano & Jonas D. M. Fisher, 2000. "Habit persistence, asset returns and the business cycle," Staff Report, Federal Reserve Bank of Minneapolis 280, Federal Reserve Bank of Minneapolis.
  31. Xavier Gabaix, 2008. "Variable Rare Disasters: An Exactly Solved Framework for Ten Puzzles in Macro-Finance," NBER Working Papers 13724, National Bureau of Economic Research, Inc.
  32. Hall, Robert E, 1988. "Intertemporal Substitution in Consumption," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(2), pages 339-57, April.
  33. Epstein, Larry G & Zin, Stanley E, 1991. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: An Empirical Analysis," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(2), pages 263-86, April.
  34. Kocherlakota, Narayana R., 1990. "On the 'discount' factor in growth economies," Journal of Monetary Economics, Elsevier, Elsevier, vol. 25(1), pages 43-47, January.
  35. Jermann, Urban J., 1998. "Asset pricing in production economies," Journal of Monetary Economics, Elsevier, Elsevier, vol. 41(2), pages 257-275, April.
  36. Philippe Weil, 1989. "The Equity Premium Puzzle and the Riskfree Rate Puzzle," NBER Working Papers 2829, National Bureau of Economic Research, Inc.
  37. Eric T. Swanson, 2012. "Risk Aversion and the Labor Margin in Dynamic Equilibrium Models," American Economic Review, American Economic Association, American Economic Association, vol. 102(4), pages 1663-91, June.
  38. Glenn D. Rudebusch & Eric T. Swanson, 2008. "Examining the bond premium puzzle with a DSGE model," Working Paper Series, Federal Reserve Bank of San Francisco 2007-25, Federal Reserve Bank of San Francisco.
  39. Epstein, Larry G & Zin, Stanley E, 1989. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework," Econometrica, Econometric Society, Econometric Society, vol. 57(4), pages 937-69, July.
Full references (including those not matched with items on IDEAS)

Citations

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
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Martin Schneider & Cosmin Ilut & Francesco Bianchi, 2013. "Uncertainty Shocks, Asset Supply and Pricing over the Business Cycle," 2013 Meeting Papers, Society for Economic Dynamics 202, Society for Economic Dynamics.
  2. 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.
  3. Dimitris Papageorgiou, 2014. "BoGGEM: a dynamic stochastic general equilibrium model for policy simulations," Working Papers, Bank of Greece 182, Bank of Greece.

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:zbw:bubdps:372013. 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: (ZBW - German National Library of Economics).

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.