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The Statistical Implications of Common Identifying Restrictions for DSGE Models

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  • Stephen Morris

    (UC San Diego)

Abstract

I reveal identification failures in a well-known dynamic stochastic general equilibrium (DSGE) model, and study the statistical implications of common identifying restrictions. First, I provide a fully analytical methodology for determining all observationally equivalent values of the structural parameters in any parameter space. I show that either parameter admissibility or sign restrictions may yield global identification for some parameter realizations, but not for others. Second, I derive a "plug-in" maximum likelihood estimator, which requires no numerical search. I use this tool to demonstrate that the idiosyncratic identifying restriction directly impinges on both the location and distribution of the small-sample MLE, and compute correctly sized confidence intervals.

Suggested Citation

  • Stephen Morris, 2014. "The Statistical Implications of Common Identifying Restrictions for DSGE Models," 2014 Meeting Papers 738, Society for Economic Dynamics.
  • Handle: RePEc:red:sed014:738
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    File URL: https://economicdynamics.org/meetpapers/2014/paper_738.pdf
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    References listed on IDEAS

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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The Statistical Implications of Common Identifying Restrictions for DSGE Models
      by Christian Zimmermann in NEP-DGE blog on 2015-02-05 22:29:18

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