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Identification of DSGE models—The effect of higher-order approximation and pruning

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  • Mutschler, Willi

Abstract

This paper shows how to check rank criteria for a local identification of nonlinear DSGE models, given higher-order approximations and pruning. This approach imposes additional restrictions on (higher-order) moments and polyspectra, which can be used to identify parameters that are unidentified in a first-order approximation. The identification procedures are demonstrated by means of the Kim (2003) and the An and Schorfheide (2007) models. Both models are identifiable with a second-order approximation. Furthermore, analytical derivatives of unconditional moments, cumulants and corresponding polyspectra up to fourth order are derived for the pruned state-space.

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  • Mutschler, Willi, 2015. "Identification of DSGE models—The effect of higher-order approximation and pruning," Journal of Economic Dynamics and Control, Elsevier, vol. 56(C), pages 34-54.
    • Handle: RePEc:eee:dyncon:v:56:y:2015:i:c:p:34-54
    DOI: 10.1016/j.jedc.2015.04.007
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    Cited by:

    1. Fabio Canova & Filippo Ferroni & Christian Matthes, 2015. "Approximating Time Varying Structural Models With Time Invariant Structures," Working Paper 15-10, Federal Reserve Bank of Richmond.
    2. Prosper Dovonon & Alastair Hall, 2018. "The Asymptotic Properties of GMM and Indirect Inference under Second-order Identification," CIRANO Working Papers 2018s-37, CIRANO.
    3. Mutschler, Willi, 2018. "Higher-order statistics for DSGE models," Econometrics and Statistics, Elsevier, vol. 6(C), pages 44-56.
    4. Adjemian, Stéphane & Bastani, Houtan & Juillard, Michel & Karamé, Fréderic & Mihoubi, Ferhat & Mutschler, Willi & Pfeifer, Johannes & Ratto, Marco & Rion, Normann & Villemot, Sébastien, 2022. "Dynare: Reference Manual Version 5," Dynare Working Papers 72, CEPREMAP, revised Mar 2023.
      • Stéphane Adjemian & Houtan Bastani & Michel Juillard & Frédéric Karamé & Ferhat Mihoubi & Willi Mutschler & Johannes Pfeifer & Marco Ratto & Sébastien Villemot & Normann Rion, 2023. "Dynare: Reference Manual Version 5," PSE Working Papers hal-04219920, HAL.
      • Stéphane Adjemian & Houtan Bastani & Michel Juillard & Frédéric Karamé & Ferhat Mihoubi & Willi Mutschler & Johannes Pfeifer & Marco Ratto & Sébastien Villemot & Normann Rion, 2023. "Dynare: Reference Manual Version 5," Working Papers hal-04219920, HAL.
    5. Prosper Dovonon & Alastair R. Hall, 2017. "The Asymptotic Properties of GMM and Indirect Inference Under Second-Order Identification," Economics Discussion Paper Series 1705, Economics, The University of Manchester.
    6. Adjemian, Stéphane & Juillard, Michel & Karamé, Fréderic & Mutschler, Willi & Pfeifer, Johannes & Ratto, Marco & Rion, Normann & Villemot, Sébastien, 2024. "Dynare: Reference Manual, Version 6," Dynare Working Papers 80, CEPREMAP, revised Sep 2024.
    7. Dovonon, Prosper & Hall, Alastair R., 2018. "The asymptotic properties of GMM and indirect inference under second-order identification," Journal of Econometrics, Elsevier, vol. 205(1), pages 76-111.
    8. Ivashchenko, Sergey & Mutschler, Willi, 2020. "The effect of observables, functional specifications, model features and shocks on identification in linearized DSGE models," Economic Modelling, Elsevier, vol. 88(C), pages 280-292.

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    More about this item

    Keywords

    Identification; Pruning; Higher-order moments; Cumulants; Polyspectra; Analytical derivatives;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models

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