IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Measurement with minimal theory

  • Ellen R. McGrattan

A central debate in applied macroeconomics is whether statistical tools that use minimal identifying assumptions are useful for isolating promising models within a broad class. In this paper, I compare three statistical models - a vector autoregressive moving average (VARMA) model, an unrestricted state space model, and a restricted state space model - that are all consistent with the same prototype business cycle model. The business cycle model is a prototype in the sense that many models, with various frictions and shocks, are observationally equivalent to it. The statistical models I consider differ in the amount of a priori theory that is imposed, with VARMAs imposing minimal assumptions and restricted state space models imposing the maximal. The objective is to determine if it is possible to successfully uncover statistics of interest for business cycle theorists with sample sizes used in practice and only minimal identifying assumptions imposed. I find that the identifying assumptions of VARMAs and unrestricted state space models are too minimal: The range of estimates are so large as to be uninformative for most statistics that business cycle researchers need to distinguish alternative theories.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.minneapolisfed.org/research/common/pub_detail.cfm?pb_autonum_id=1059
Our checks indicate that this address may not be valid because: 404 Not Found (http://www.minneapolisfed.org/research/common/pub_detail.cfm?pb_autonum_id=1059 [302 Redirect]--> https://www.minneapolisfed.org/research/common/pub_detail.cfm?pb_autonum_id=1059). If this is indeed the case, please notify (Janelle Ruswick)


Download Restriction: no

File URL: http://www.minneapolisfed.org/research/WP/WP643.pdf
Download Restriction: no

Paper provided by Federal Reserve Bank of Minneapolis in its series Working Papers with number 643.

as
in new window

Length:
Date of creation: 2006
Date of revision:
Handle: RePEc:fip:fedmwp:643
Contact details of provider: Postal: 90 Hennepin Avenue, P.O. Box 291, Minneapolis, MN 55480-0291
Phone: (612) 204-5000
Web page: http://minneapolisfed.org/
More information through EDIRC

Order Information: Web: http://www.minneapolisfed.org/pubs/ Email:


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.:

as in new window
  1. Harald Uhlig, 1998. "A Toolkit for Analysing Nonlinear Dynamic Stochastic Models Easily," QM&RBC Codes 123, Quantitative Macroeconomics & Real Business Cycles.
  2. V.V. Chari & Patrick J. Kehoe & Ellen McGrattan, 2004. "Business Cycle Accounting," NBER Working Papers 10351, National Bureau of Economic Research, Inc.
  3. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2008. "Are Structural VARs with Long-Run Restrictions Useful in Developing Business Cycle Theory?," NBER Working Papers 14430, National Bureau of Economic Research, Inc.
  4. Burmeister, Edwin & Wall, Kent D & Hamilton, James D, 1986. "Estimation of Unobserved Expected Monthly Inflation Using Kalman Filtering," Journal of Business & Economic Statistics, American Statistical Association, vol. 4(2), pages 147-60, April.
  5. Hannan, E J, 1976. "The Identification and Parameterization of ARMAX and State Space Forms," Econometrica, Econometric Society, vol. 44(4), pages 713-23, July.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:fip:fedmwp:643. 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: (Janelle Ruswick)

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.