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Time-Varying Parameter Four-Equation DSGE Model

Author

Listed:
  • Gupta Rangan

    (Department of Economics, 56410 University of Pretoria , Pretoria, South Africa)

  • Sun Xiaojin

    (Department of Economics and Finance, University of Texas at El Paso, El Paso, TX, USA)

Abstract

We build the time-varying parameter feature into the (Sims, E., J. C. Wu, and J. Zhang. 2023. “The Four-Equation New Keynesian Model.” The Review of Economics and Statistics 105 (4): 931–47) four-equation Dynamic Stochastic General Equilibrium (DSGE) model in this paper. We find that both parameters and impulse responses of the variables in the four-equation DSGE model exhibit significant variation over time. Allowing model parameters to vary over time also improves the model’s forecasting performance.

Suggested Citation

  • Gupta Rangan & Sun Xiaojin, 2025. "Time-Varying Parameter Four-Equation DSGE Model," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 29(2), pages 235-246.
    • Handle: RePEc:bpj:sndecm:v:29:y:2025:i:2:p:235-246:n:1001
    DOI: 10.1515/snde-2023-0010
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    More about this item

    Keywords

    four-equation DSGE; time-varying parameter; forecasting;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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