Journal of Monetary Economics2013-09-05 2:57 AM

Identification-robust analysis of DSGE and structural macroeconomic models

Highlights • We propose two system-based identification-robust methods for DSGE models. • Valid under weak identification and auxiliary assumptions that complete models. • We apply to an illustrative New Keynesian system estimated using U.S. data. • Complete model is rejected; forcing variable coefficients are insignificant. • But NKPC is forward-looking; precise estimates obtained in Taylor rule. Abstract Full- and limited-information identification-robust methods are proposed for structural systems, notably DSGE models, which are valid whether identification is weak or strong, theory-intrinsic or data-specific. The proposed methods are applied to a standard New Keynesian system for the U.S. Single- and multi-equation estimation and fit are also compared. When a unique rational-expectation stable equilibrium is imposed, the model is rejected. In contrast, limited-information inference produces informative results regarding forward-looking behavior in the NKPC and precise conclusions on feedback coefficients in the reaction function, which cannot be reached via single-equation methods.

KEYWORDS

SHARE & LIKE

COMMENTS

ABOUT THE AUTHOR

Journal of Monetary Economics

The Journal of Monetary Economics is a peer-reviewed academic journal covering research on macroeconomics and monetary economics. It is published by Elsevier and was established in October 1973 by Karl Brunner and Charles I. Plosser.

0 Following 0 Fans 0 Projects 39 Articles

SIMILAR ARTICLES

Highlights • Friedman rule assumes a source of finance: lump-sum taxation. • Lump-sum taxes are like a debt obligation. • If people are permitted to

Read More

Highlights • We link the boom that preceded the "Great Recession" and the eventual bust together. • Expected gains from financial innovations may hav

Read More

Highlights • Endogenous investment booms and busts arise in a rational expectations framework. • Aggregate distortions exist despite the design of op

Read More

Highlights • An economy where defaulters lose collateral and exclusion occurs probabilistically. • A higher exclusion probability implies better enfo

Read More

Highlights • The regional availability of bond and bank financing induces debt inflexibility. • Inflexibility limits the firm's ability to replace ba

Read More

Highlights • We study economic growth through eliminating rather than augmenting non-reproducible factors. • We obtain the balanced growth path and c

Read More

Highlights • This paper shows that investor sentiment helps account for the forward premium puzzle. • The same mechanism helps account for other styl

Read More

Highlights • Macro model with banks. • Bank runs and endogenous bank capital. • Risk taking channel. • Endogenous risk formation. • Optimal an

Read More

Highlights • Government investment in public capital forecasts high risk premiums. • Result is in contrast with negative link between private invest

Read More

Highlights • We propose two system-based identification-robust methods for DSGE models. • Valid under weak identification and auxiliary assumptions

Read More