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Bridging DSGE models and the raw data


  • Canova, Fabio


A method to estimate DSGE models using the raw data is proposed. The approach links the observables to the model counterparts via a flexible specification which does not require the model-based component to be located solely at business cycle frequencies, allows the non-model-based component to take various time series patterns, and permits certain types of model misspecification. Applying standard data transformations induces biases in structural estimates and distortions in the policy conclusions. The proposed approach recovers important model-based features in selected experimental designs. Two widely discussed issues are used to illustrate its practical use.

Suggested Citation

  • Canova, Fabio, 2014. "Bridging DSGE models and the raw data," Journal of Monetary Economics, Elsevier, vol. 67(C), pages 1-15.
  • Handle: RePEc:eee:moneco:v:67:y:2014:i:c:p:1-15 DOI: 10.1016/j.jmoneco.2014.06.003

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    References listed on IDEAS

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    Cited by:

    1. Grant, Angelia L. & Chan, Joshua C.C., 2017. "Reconciling output gaps: Unobserved components model and Hodrick–Prescott filter," Journal of Economic Dynamics and Control, Elsevier, vol. 75(C), pages 114-121.
    2. repec:wly:japmet:v:32:y:2017:i:1:p:103-119 is not listed on IDEAS
    3. Altug, Sumru & Çakmaklı, Cem, 2016. "Forecasting inflation using survey expectations and target inflation: Evidence for Brazil and Turkey," International Journal of Forecasting, Elsevier, vol. 32(1), pages 138-153.
    4. repec:eee:dyncon:v:81:y:2017:i:c:p:140-161 is not listed on IDEAS
    5. Anders Warne & Günter Coenen & Kai Christoffel, 2017. "Marginalized Predictive Likelihood Comparisons of Linear Gaussian State‐Space Models with Applications to DSGE, DSGE‐VAR, and VAR Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 32(1), pages 103-119, January.
    6. repec:aea:aecrev:v:107:y:2017:i:7:p:1971-2006 is not listed on IDEAS
    7. repec:wly:japmet:v:32:y:2017:i:4:p:744-763 is not listed on IDEAS
    8. Wolters, Maik Hendrik, 2016. "How the Baby Boomers' Retirement Wave Distorts Model-Based Output Gap Estimates," Annual Conference 2016 (Augsburg): Demographic Change 145812, Verein für Socialpolitik / German Economic Association.
    9. Galvão, Ana Beatriz, 2017. "Data revisions and DSGE models," Journal of Econometrics, Elsevier, vol. 196(1), pages 215-232.
    10. Gabriela Simonet & Julie Subervie & Driss Ezzine-De-Blas & Marina Cromberg & Amy Duchelle, 2015. "Paying smallholders not to cut down the amazon forest: impact evaluation of a REDD+ pilot project," Working Papers 1514, Chaire Economie du climat.
    11. Milani, Fabio, 2017. "Sentiment and the U.S. business cycle," Journal of Economic Dynamics and Control, Elsevier, vol. 82(C), pages 289-311.
    12. Alice, Albonico & Roberta, Cardani & Patrizio, Tirelli, 2017. "Debunking the Myth of Southern Profligacy. A DSGE Analysis of Business Cycles in the EMU’s Big Four," Working Papers 373, University of Milano-Bicocca, Department of Economics, revised 05 Nov 2017.
    13. Kilian, Lutz & Zhou, Xiaoqing, 2017. "Modeling Fluctuations in the Global Demand for Commodities," CEPR Discussion Papers 12357, C.E.P.R. Discussion Papers.
    14. Christophe Gouel & Nicolas Legrand, 2017. "Estimating the Competitive Storage Model with Trending Commodity Prices," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 32(4), pages 744-763, June.
    15. repec:eee:jimfin:v:79:y:2017:i:c:p:99-114 is not listed on IDEAS
    16. Ferroni, Filippo & Grassi, Stefano & Leon-Ledesma, Miguel A., 2017. "Selecting Primal Innovations in DSGE models," Working Paper Series WP-2017-20, Federal Reserve Bank of Chicago.
    17. Filippo Ferroni & Stefano Grassi & Miguel A. Leon-Ledesma, 2015. "Fundamental shock selection in DSGE models," Studies in Economics 1508, School of Economics, University of Kent.
    18. Christopher Gust & Edward Herbst & David López-Salido & Matthew E. Smith, 2017. "The Empirical Implications of the Interest-Rate Lower Bound," American Economic Review, American Economic Association, vol. 107(7), pages 1971-2006, July.
    19. Albonico, Alice & Paccagnini, Alessia & Tirelli, Patrizio, 2017. "Great recession, slow recovery and muted fiscal policies in the US," Journal of Economic Dynamics and Control, Elsevier, vol. 81(C), pages 140-161.
    20. Silvio Michael de Azevedo Costa, 2016. "Structural Trends and Cycles in a DSGE Model for Brazil," Working Papers Series 434, Central Bank of Brazil, Research Department.


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