On the Statistical Identification of DSGE Models

Carlo Favero (), Agostino Consolo and Alessia Paccagnini

No 7176, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Dynamic Stochastic General Equilibrium (DSGE) models are now considered attractive by the profession not only from the theoretical perspective but also from an empirical standpoint. As a consequence of this development, methods for diagnosing the fit of these models are being proposed and implemented. In this article we illustrate how the concept of statistical identification, that was introduced and used by Spanos(1990) to criticize traditional evaluation methods of Cowles Commission models, could be relevant for DSGE models. We conclude that the recently proposed model evaluation method, based on the DSGE-VAR(ë), might not satisfy the condition for statistical identification. However, our application also shows that the adoption of a FAVAR as a statistically identified benchmark leaves unaltered the support of the data for the DSGE model and that a DSGE-FAVAR can be an optimal forecasting model.

Keywords: Bayesian analysis; Dynamic stochastic general equilibrium model; Factor-augmented vector autoregression; Model evaluation (search for similar items in EconPapers)
JEL-codes: C11 C52 (search for similar items in EconPapers)
Date: 2009-02
New Economics Papers: this item is included in nep-cba, nep-dge, nep-ecm and nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

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Related works:
Journal Article: On the statistical identification of DSGE models (2009)
Working Paper: On the statistical identification of DSGE models (2009)
Working Paper: On the Statistical Identification of DSGE Models (2007)
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