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Forming Priors for DSGE Models (and How it Affects the Assessment of Nominal Rigidities)

  • Marco Del Negro
  • Frank Schorfheide

The 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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13741.

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Date of creation: Jan 2008
Date of revision:
Publication status: published as Del Negro, Marco & Schorfheide, Frank, 2008. "Forming priors for DSGE models (and how it affects the assessment of nominal rigidities)," Journal of Monetary Economics, Elsevier, vol. 55(7), pages 1191-1208, October.
Handle: RePEc:nbr:nberwo:13741
Note: EFG ME
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