Estimating DSGE models with unknown data persistence

Gianluca Moretti () and Giulio Nicoletti ()
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Gianluca Moretti: Bank of Italy
Giulio Nicoletti: Bank of Italy

No 750, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: Recent empirical literature shows that key macro variables such as GDP and productivity display long memory dynamics. For DSGE models, we propose a �Generalized� Kalman Filter to deal effectively with this problem: our method connects to and innovates upon data-filtering techniques already used in the DSGE literature. We show our method produces more plausible estimates of the deep parameters as well as more accurate out-of-sample forecasts of macroeconomic data.

Keywords: DSGE models; long memory; Kalman Filter. (search for similar items in EconPapers)
JEL-codes: C51 C53 E37 (search for similar items in EconPapers)
Date: 2010-03
New Economics Papers: this item is included in nep-dge and nep-ecm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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