IDEAS home Printed from https://ideas.repec.org/p/bot/quadip/wpaper133.html
   My bibliography  Save this paper

Bootstrapping DSGE models

Author

Listed:
  • Giovanni Angelini

    () (Università di Bologna)

  • Giuseppe Cavaliere

    () (Università di Bologna)

  • Luca Fanelli

    () (Università di Bologna)

Abstract

This paper explores the potential of bootstrap methods in the empirical evalu- ation of dynamic stochastic general equilibrium (DSGE) models and, more generally, in linear rational expectations models featuring unobservable (latent) components. We consider two dimensions. First, we provide mild regularity conditions that suffice for the bootstrap Quasi- Maximum Likelihood (QML) estimator of the structural parameters to mimic the asymptotic distribution of the QML estimator. Consistency of the bootstrap allows to keep the probability of false rejections of the cross-equation restrictions under control. Second, we show that the realizations of the bootstrap estimator of the structural parameters can be constructively used to build novel, computationally straightforward tests for model misspecification, including the case of weak identification. In particular, we show that under strong identification and boot- strap consistency, a test statistic based on a set of realizations of the bootstrap QML estimator approximates the Gaussian distribution. Instead, when the regularity conditions for inference do not hold as e.g. it happens when (part of) the structural parameters are weakly identified, the above result is no longer valid. Therefore, we can evaluate how close or distant is the esti- mated model from the case of strong identification. Our Monte Carlo experimentations suggest that the bootstrap plays an important role along both dimensions and represents a promising evaluation tool of the cross-equation restrictions and, under certain conditions, of the strength of identification. An empirical illustration based on a small-scale DSGE model estimated on U.S. quarterly observations shows the practical usefulness of our approach.

Suggested Citation

  • Giovanni Angelini & Giuseppe Cavaliere & Luca Fanelli, 2016. "Bootstrapping DSGE models," Quaderni di Dipartimento 3, Department of Statistics, University of Bologna.
  • Handle: RePEc:bot:quadip:wpaper:133
    as

    Download full text from publisher

    File URL: http://amsacta.unibo.it/id/eprint/5412
    Download Restriction: no

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Bootstrapping DSGE models
      by Christian Zimmermann in NEP-DGE blog on 2016-10-17 19:10:45

    More about this item

    Keywords

    Bootstrap; Cross-equation restrictions; DSGE; QLR test; State space model; Weak identification.;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bot:quadip:wpaper:133. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michela Mengoli). General contact details of provider: http://edirc.repec.org/data/dsbolit.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.