Impulse Response Identification in DSGE Models
DSGE models have become a widely used tool for policymakers. This paper takes the global identification theory used for structural vectorautoregressions, and applies it to dynamic stochastic general equilibrium (DSGE) models. We use this modified 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.
|Date of creation:||Dec 2009|
|Date of revision:|
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- Nikolay Iskrev, 2009.
"Local Identification in DSGE Models,"
w200907, Banco de Portugal, Economics and Research Department.
- Fabio Canova & Luca Sala, 2006.
"Back to square one: identification issues in DSGE models,"
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196, Society for Computational Economics.
- Canova, Fabio & Sala, Luca, 2009. "Back to square one: Identification issues in DSGE models," Journal of Monetary Economics, Elsevier, vol. 56(4), pages 431-449, May.
- Fabio Canova & Luca Sala, 2007. "Back to square one: identification issues in DSGE models," Working Papers 0715, Banco de España;Working Papers Homepage.
- Fabio Canova & Luca Sala, 2006. "Back to Square One: Identification Issues in DSGE Models," Working Papers 303, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Fabio Canova & Luca Sala, 2005. "Back to square one: Identification issues in DSGE models," Economics Working Papers 927, Department of Economics and Business, Universitat Pompeu Fabra, revised Sep 2006.
- Canova, Fabio & Sala, Luca, 2009. "Back to square one: identification issues in DSGE models," CEPR Discussion Papers 7234, C.E.P.R. Discussion Papers.
- Canova, Fabio & Sala, Luca, 2006. "Back to square one: identification issues in DSGE models," Working Paper Series 0583, European Central Bank.
- Rothenberg, Thomas J, 1971. "Identification in Parametric Models," Econometrica, Econometric Society, vol. 39(3), pages 577-91, May.
- Juan F. Rubio-Ramírez & Daniel F. Waggoner & Tao Zha, 2008.
"Structural vector autoregressions: theory of identification and algorithms for inference,"
FRB Atlanta Working Paper
2008-18, Federal Reserve Bank of Atlanta.
- Juan F. Rubio-Ramírez & Daniel F. Waggoner & Tao Zha, 2010. "Structural Vector Autoregressions: Theory of Identification and Algorithms for Inference," Review of Economic Studies, Oxford University Press, vol. 77(2), pages 665-696.
- Iskrev, Nikolay, 2008. "Evaluating the information matrix in linearized DSGE models," Economics Letters, Elsevier, vol. 99(3), pages 607-610, June.
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