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Forming priors for DSGE models (and how it affects the assessment of nominal rigidities)

Listed author(s):
  • Marco Del Negro
  • Frank Schorfheide

This paper discusses prior elicitation for the parameters of dynamic stochastic general equilibrium (DSGE) models and provides a method for constructing prior distributions for a subset of these parameters from beliefs about the moments of the endogenous variables. The empirical application studies the role of price and wage rigidities in a New Keynesian DSGE model and finds that standard macro time series cannot discriminate among theories that differ in the quantitative importance of nominal frictions.

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File URL: https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr320.pdf
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Paper provided by Federal Reserve Bank of New York in its series Staff Reports with number 320.

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Date of creation: 2008
Handle: RePEc:fip:fednsr:320
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  38. Linde, Jesper, 2005. "Estimating New-Keynesian Phillips curves: A full information maximum likelihood approach," Journal of Monetary Economics, Elsevier, vol. 52(6), pages 1135-1149, September.
  39. David Altig & Lawrence Christiano & Martin Eichenbaum & Jesper Linde, 2011. "Firm-Specific Capital, Nominal Rigidities and the Business Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(2), pages 225-247, April.
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