Which Structural Parameters Are "Structural"? Identifying the Sources of Instabilities in Economic Models
The objective of this paper is to identify which parameters of a model are stable over time. Existing procedures can only be used to test whether a given subset of parameters is stable, and cannot be used to find which subset of parameters is stable. We propose a new procedure that is informative on the nature of instabilities affecting economic models, and sheds light on the economic interpretation and causes of such instabilities. Furthermore, our procedure provides clear guidelines on which parts of the model are reliable for policy analysis and which are possibly mis-specified. Our empirical findings suggest that instabilities during the Great Moderation were mainly concentrated in Euler and IS equations as well as in monetary policy. Such results offer important insights to guide the future theoretical development of macroeconomic models.
|Date of creation:||2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (919) 660-1800
Fax: (919) 684-8974
Web page: http://econ.duke.edu/
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Del Negro, Marco & Schorfheide, Frank & Smets, Frank & Wouters, Rafael, 2005.
"On the Fit and Forecasting Performance of New Keynesian Models,"
CEPR Discussion Papers
4848, C.E.P.R. Discussion Papers.
- Del Negro, Marco & Schorfheide, Frank & Smets, Frank & Wouters, Raf, 2005. "On the fit and forecasting performance of New-Keynesian models," Working Paper Series 0491, European Central Bank.
- Marco Del Negro & Frank Schorfheide & Frank Smets & Raf Wouters, 2004. "On the fit and forecasting performance of New Keynesian models," FRB Atlanta Working Paper No. 2004-37, Federal Reserve Bank of Atlanta.
- Jesús Fernández-Villaverde & Juan F Rubio-Ramírez, 2007.
"How Structural Are Structural Parameters?,"
843644000000000057, UCLA Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:duk:dukeec:08-02. 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: (Department of Economics Webmaster)
If references are entirely missing, you can add them using this form.