A DSGE Model with Housing in the Cointegrated VAR Framework
In order to empirically investigate the assumptions underlying a theoretical dynamic stochastic general equilibrium (DSGE) model, the long-run and the short-run structure of the model may be imposed in the framework given by a cointegrated vector autoregression (CVAR) model. By following the method outlined in Juselius and Franchi (2007), I use the CVAR model to investigate the restrictions underlying the DSGE model in Iacoviello (2005), which is a monetary business cycle model that includes housing in order to include e ects from the nancial accelerator. This yields a common trends representation of the data subject to the theoretical constraints of the DSGE model which can be used to calculate the impulse responses for different shocks. These impulse responses are then compared to the impulse responses presented in Iacoviello (2005). The main finding is that the results given by the estimated CVAR model do not correspond well to the restrictions of the DSGE model. This is shown both by testing the cointegrating relationships implied by the long-run relations, and the response to shocks in the period for which the model is estimated. Imposing theoretical restrictions pertaining to the DSGE model in Iacoviello (2005) on his estimated VAR model yields different impulse responses from various shocks which change some of the main findings of the model. Particularly, imposing long-run homogeneity between housing prices and output and imposing the Fisher relationship which is assumed in the theoretical model seems to yield results which are opposite of what the financial accelerator, which is one of the key motivations behind the model in Iacoviello (2005), suggests. The non-stationarity of inflation and the nominal interest rate may be important reasons for this, together with the non-acceptance of the imposed long-run hypotheses.
|Date of creation:||03 Mar 2012|
|Date of revision:|
|Contact details of provider:|| Postal: 7491 Trondheim|
Phone: 73 59 19 40
Fax: 73 59 69 54
Web page: http://www.svt.ntnu.no/iso/WP/wp.htm
More information through EDIRC
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.:
- Matteo Iacoviello, 2005.
"House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle,"
American Economic Review,
American Economic Association, vol. 95(3), pages 739-764, June.
- Matteo Iacoviello, 2002. "House prices, borrowing constraints and monetary policy in the business cycle," Boston College Working Papers in Economics 542, Boston College Department of Economics, revised 06 Dec 2004.
- Johansen, Soren, 2002.
"A small sample correction for tests of hypotheses on the cointegrating vectors,"
Journal of Econometrics,
Elsevier, vol. 111(2), pages 195-221, December.
- Johansen, S., 1999. "A Small Sample Correction for Tests of Hypotheses on the Cointegrating Vectors," Economics Working Papers eco99/9, European University Institute.
- John Moore & Nobuhiro Kiyotaki, .
1995-5, Edinburgh School of Economics, University of Edinburgh.
- Juselius, Katarina, 2006. "The Cointegrated VAR Model: Methodology and Applications," OUP Catalogue, Oxford University Press, number 9780199285679, December.
- Johansen, S ren, 2000.
"A Bartlett Correction Factor For Tests On The Cointegrating Relations,"
Cambridge University Press, vol. 16(05), pages 740-778, October.
- Johansen, S., 1999. "A Bartlett Correction Factor for Tests on the Cointegrating Relations," Economics Working Papers eco99/10, European University Institute.
- Peter N. Ireland, 1999.
"A method for taking models to the data,"
9903, Federal Reserve Bank of Cleveland.
- Peter Ireland, 1999. "A Method for Taking Models to the Data," Computing in Economics and Finance 1999 1233, Society for Computational Economics.
- Peter N. Ireland, 1999. "A Method for Taking Models to the Data," Boston College Working Papers in Economics 421, Boston College Department of Economics.
- Peter Ireland, 1999. "Matlab code for A Method for Taking Models to the Data," QM&RBC Codes 46, Quantitative Macroeconomics & Real Business Cycles.
- Engle, Robert & Granger, Clive, 2015.
"Co-integration and error correction: Representation, estimation, and testing,"
Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
- Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
- Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999.
"The financial accelerator in a quantitative business cycle framework,"
Handbook of Macroeconomics,
in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393
- Ben Bernanke & Mark Gertler & Simon Gilchrist, 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," NBER Working Papers 6455, National Bureau of Economic Research, Inc.
- Bernanke, B. & Gertler, M. & Gilchrist, S., 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," Working Papers 98-03, C.V. Starr Center for Applied Economics, New York University.
- Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, December.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- David N. DeJong & Chetan Dave, 2007. "Introduction to Structural Macroeconometrics," Introductory Chapters, in: Structural Macroeconometrics Princeton University Press.
When requesting a correction, please mention this item's handle: RePEc:nst:samfok:12712. 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: (Hilde Saxi Gildberg)
If references are entirely missing, you can add them using this form.