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

  • Pablo A. Guerron-Quintana

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

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.

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File URL: http://hdl.handle.net/10.1002/jae.1106
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File URL: http://qed.econ.queensu.ca:80/jae/2010-v25.5/
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Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 25 (2010)
Issue (Month): 5 ()
Pages: 774-804

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Handle: RePEc:jae:japmet:v:25:y:2010:i:5:p:774-804
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  10. Jonas D. M. Fisher, 2006. "The Dynamic Effects of Neutral and Investment-Specific Technology Shocks," Journal of Political Economy, University of Chicago Press, vol. 114(3), pages 413-451, June.
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  16. Chang-Jin Kim & Charles R. Nelson, 1999. "State-Space Models with Regime Switching: Classical and Gibbs-Sampling Approaches with Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262112388, June.
  17. Christopher J. Erceg & Dale W. Henderson & Andrew T. Levin, 1999. "Optimal monetary policy with staggered wage and price contracts," International Finance Discussion Papers 640, Board of Governors of the Federal Reserve System (U.S.).
  18. Fernandez-Villaverde, Jesus & Francisco Rubio-Ramirez, Juan, 2004. "Comparing dynamic equilibrium models to data: a Bayesian approach," Journal of Econometrics, Elsevier, vol. 123(1), pages 153-187, November.
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