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Policy Predictions if the Model Does Not Fit

Author

Listed:
  • Marco Del Negro

    (Federal Reserve Bank of Atlanta,)

  • Frank Schorfheide

    (University of Pennsylvania,)

Abstract

This paper uses a novel method for conducting policy analysis with potentially misspecified DSGE models and applies it to a simple New Keynesian DSGE model. We illustrate the sensitivity of the results to assumptions on the policy invariance of model misspecifications. (JEL: C32, E52) Copyright (c) 2005 The European Economic Association.

Suggested Citation

  • Marco Del Negro & Frank Schorfheide, 2005. "Policy Predictions if the Model Does Not Fit," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 434-443, 04/05.
    • Handle: RePEc:tpr:jeurec:v:3:y:2005:i:2-3:p:434-443
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    Cited by:

    1. Marco Del Negro & Frank Schorfheide, 2009. "Monetary Policy Analysis with Potentially Misspecified Models," American Economic Review, American Economic Association, vol. 99(4), pages 1415-1450, September.
    2. Andrea Carriero, 2011. "Forecasting The Yield Curve Using Priors From No‐Arbitrage Affine Term Structure Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(2), pages 425-459, May.
    3. Cole, Stephen J. & Milani, Fabio, 2019. "The Misspecification Of Expectations In New Keynesian Models: A Dsge-Var Approach," Macroeconomic Dynamics, Cambridge University Press, vol. 23(3), pages 974-1007, April.
    4. Fabio Canova, 2007. "How much structure in empirical models?," Economics Working Papers 1054, Department of Economics and Business, Universitat Pompeu Fabra.
    5. William A. Brock & Steven N. Durlauf & Kenneth D. West, 2005. "Model uncertainty and policy evaluation: some theory and empirics," Proceedings, Federal Reserve Bank of San Francisco.
    6. Dufour, Jean-Marie & Khalaf, Lynda & Kichian, Maral, 2010. "On the precision of Calvo parameter estimates in structural NKPC models," Journal of Economic Dynamics and Control, Elsevier, vol. 34(9), pages 1582-1595, September.
    7. Brock, William A. & Durlauf, Steven N. & West, Kenneth D., 2007. "Model uncertainty and policy evaluation: Some theory and empirics," Journal of Econometrics, Elsevier, vol. 136(2), pages 629-664, February.
    8. Eilev S. Jansen, 2004. "Modelling inflation in the Euro Area," Working Paper 2004/10, Norges Bank.

    More about this item

    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
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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