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Impulse response identification in DSGE models

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  • Martin Fukac

Abstract

Dynamic stochastic general equilibrium (DSGE) models have become a widely used tool for policymakers. This paper modifies the global identification theory used for structural vector autoregressions, and applies it to DSGE models. We use this theory to check whether a DSGE model structure allows for unique estimates of structural shocks and their dynamic effects. The potential cost of a lack of identification for policy oriented models along that specific dimension is huge, as the same model can generate a number of contrasting yet theoretically and empirically justifiable recommendations. The problem and methodology are illustrated using a simple New Keynesian business cycle model.

Suggested Citation

  • Martin Fukac, 2010. "Impulse response identification in DSGE models," Research Working Paper RWP 10-07, Federal Reserve Bank of Kansas City.
    • Handle: RePEc:fip:fedkrw:rwp10-07
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    Cited by:

    1. Andrew Binning & Junior Maih, 2015. "Sigma point filters for dynamic nonlinear regime switching models," Working Paper 2015/10, Norges Bank.

    More about this item

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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