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What you match does matter: the effects of data on DSGE estimation

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  • Pablo A. Guerron-Quintana

    (Department of Economics, North Carolina State University, Raleigh, NC, USA)

Abstract

This paper explores the effects of using alternative combinations of observables for the estimation of Dynamic Stochastic General Equilibrium (DSGE) models. I find that the estimation of structural parameters describing the Taylor rule and sticky contracts in prices and wages is particularly sensitive to the set of observables. In terms of the model's predictions, the exclusion of some observables may lead to estimated parameters with unexpected outcomes, such as recessions following a positive technology shock. More importantly, two ways to assess different sets of observables are proposed. These measures favor a dataset consisting of seven observables. Copyright © 2009 John Wiley & Sons, Ltd.

Suggested Citation

  • Pablo A. Guerron-Quintana, 2010. "What you match does matter: the effects of data on DSGE estimation," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(5), pages 774-804.
  • Handle: RePEc:jae:japmet:v:25:y:2010:i:5:p:774-804
    DOI: 10.1002/jae.1106
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    References listed on IDEAS

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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