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Bridging DSGE models and the raw data

Listed author(s):
  • Fabio Canova

A method to estimate DSGE models using the raw data is proposed. The approach links the observables to the model counterparts via a flexible specification which does not require the model-based component to be solely located at business cycle frequencies, allows the non model-based component to take various time series patterns, and permits model misspecification. Applying standard data transformations induce biases in structural estimates and distortions in the policy conclusions. The proposed approach recovers important model-based features in selected experimental designs. Two widely discussed issues are used to illustrate its practical use.

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File URL: https://econ-papers.upf.edu/papers/1320.pdf
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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1320.

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Date of creation: Nov 2008
Date of revision: May 2012
Handle: RePEc:upf:upfgen:1320
Contact details of provider: Web page: http://www.econ.upf.edu/

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  13. Fabio Canova & Filippo Ferroni, 2009. "Multiple filtering devices for the estimation of cyclical DSGE models," Economics Working Papers 1135, Department of Economics and Business, Universitat Pompeu Fabra, revised Sep 2010.
  14. Andrle, Michal, 2008. "The Role of Trends and Detrending in DSGE Models," MPRA Paper 13289, University Library of Munich, Germany.
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