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A note on identification patterns in DSGE models

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  • Andrle, Michal

Abstract

This paper comments on selected aspects of identification issues of DSGE models. It suggests the singular value decomposition (SVD) as a useful tool for detecting local weak and non-identification. This decomposition is useful for checking rank conditions of identification, identification strength, and it also offers parameter space ‘identification patterns’. With respect to other methods of identification the singular value decomposition is particularly easy to apply and offers an intuitive interpretation. We suggest a simple algorithm for analyzing identification and an algorithm for finding a set of the most identifiable set of parameters. We also demonstrate that the use of bivariate and multiple correlation coefficients of parameters provides only limited check of identification problems. JEL Classification: F31, F41

Suggested Citation

  • Andrle, Michal, 2010. "A note on identification patterns in DSGE models," Working Paper Series 1235, European Central Bank.
  • Handle: RePEc:ecb:ecbwps:20101235
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    File URL: http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1235.pdf
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    References listed on IDEAS

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    1. Zellner, Arnold, 1985. "Bayesian Econometrics," Econometrica, Econometric Society, vol. 53(2), pages 253-269, March.
    2. Pablo Guerron-Quintana & Atsushi Inoue & Lutz Kilian, 2009. "Frequentist inference in weakly identified DSGE models," Working Papers 09-13, Federal Reserve Bank of Philadelphia.
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    Cited by:

    1. Evren Caglar & Jagjit S. Chadha & Katsuyuki Shibayama, 2011. "Bayesian Estimation of DSGE models: Is the Workhorse Model Identified?," Studies in Economics 1125, School of Economics, University of Kent.
    2. Poutineau, Jean-Christophe & Vermandel, Gauthier, 2015. "Cross-border banking flows spillovers in the Eurozone: Evidence from an estimated DSGE model," Journal of Economic Dynamics and Control, Elsevier, vol. 51(C), pages 378-403.
    3. Gary Koop & M. Hashem Pesaran & Ron P. Smith, 2013. "On Identification of Bayesian DSGE Models," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 31(3), pages 300-314, July.
    4. Acurio Vásconez, Verónica & Giraud, Gaël & Mc Isaac, Florent & Pham, Ngoc-Sang, 2015. "The effects of oil price shocks in a new-Keynesian framework with capital accumulation," Energy Policy, Elsevier, vol. 86(C), pages 844-854.
    5. Enrique Martínez-García & Mark A. Wynne, 2014. "Assessing Bayesian Model Comparison in Small Samples," Advances in Econometrics,in: Bayesian Model Comparison, volume 34, pages 71-115 Emerald Publishing Ltd.
    6. Müller, Ulrich K., 2012. "Measuring prior sensitivity and prior informativeness in large Bayesian models," Journal of Monetary Economics, Elsevier, vol. 59(6), pages 581-597.

    More about this item

    Keywords

    DSGE; Identification; information matrix; rank; singular value decomposition;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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