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Minimum Distance Estimation and Testing of DSGE Models from Structural VARs

  • Patrick Fève
  • Julien Matheron
  • Jean-Guillaume Sahuc

The aim of this paper is to complement the minimum distance estimation-structural vector autoregression 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. Copyright (c) Blackwell Publishing Ltd and the Department of Economics, University of Oxford, 2009.

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Article provided by Department of Economics, University of Oxford in its journal Oxford Bulletin of Economics and Statistics.

Volume (Year): 71 (2009)
Issue (Month): 6 (December)
Pages: 883-894

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Handle: RePEc:bla:obuest:v:71:y:2009:i:6:p:883-894
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