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How deep are the deep parameters?

  • Filippo Altissimo

    ()

    (Bank of Italy, Economic Research Department)

  • Stefano Siviero

    ()

    (Bank of Italy, Economic Research Department)

  • Daniele Terlizzese

    ()

    (Bank of Italy, Economic Research Department)

Policy evaluation based on the estimation of dynamic stochastic general equilibrium models with aggregate macroeconomic time series rests on the assumption that a representative agent can be identified, whose behavioural parameters are independent of the policy rules. Building on earlier work by Geweke, the main goal of this paper is to show that the representative agent is in general not structural, in the sense that its estimated behavioural parameters are not policyindependent. The paper identifies two different sources of nonstructurality. The latter is shown to be a fairly general feature of optimizing representative agent rational expectations models estimated on macroeconomic data.

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File URL: http://www.bancaditalia.it/pubblicazioni/temi-discussione/1999/1999-0354/tema_354_99.pdf
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Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 354.

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Date of creation: Jun 1999
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Handle: RePEc:bdi:wptemi:td_354_99
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Web page: http://www.bancaditalia.it

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  1. Christopher A. Sims, 1982. "Policy Analysis with Econometric Models," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 13(1), pages 107-164.
  2. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  3. Thomas J. Sargent, 1980. "Interpreting economic time series," Staff Report 58, Federal Reserve Bank of Minneapolis.
  4. Frank Hahn & Robert Solow, 1997. "A Critical Essay on Modern Macroeconomic Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 026258154x, June.
  5. Hansen, Lars Peter & Sargent, Thomas J., 1980. "Formulating and estimating dynamic linear rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 7-46, May.
  6. Malinvaud, Edmond, 1981. "Econometrics Faced with the Needs of Macroeconomic Policy," Econometrica, Econometric Society, vol. 49(6), pages 1363-75, November.
  7. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-136, Spring.
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