The Pruned State-Space System for Non-Linear DSGE Models: Theory and Empirical Applications

Martin M. Andreasen, Jesus Fernandez-Villaverde and Juan F Rubio-Ramirez

No 2016-07, Working Papers from FEDEA

Abstract: This paper studies the pruned state-space system for higher-order perturbation approximations to DSGE models. We show the stability of the pruned approximation up to third order and provide closed-form expressions for first and second unconditional moments and impulse response functions. Our results introduce GMM estimation and impulse-response matching for DSGE models approximated up to third order and provide a foundation for indirect inference and SMM. As an application, we consider a New Keynesian model with Epstein-Zin-Weil preferences and two novel feedback effects from long-term bonds to the real economy, allowing us to match the level and variability of the 10-year term premium in the U.S. with a low relative risk aversion of 5.

Date: 2016-09
New Economics Papers: this item is included in nep-dge, nep-ecm and nep-ets
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://documentos.fedea.net/pubs/dt/2016/dt2016-07.pdf (application/pdf)

Related works:
Journal Article: The Pruned State-Space System for Non-Linear DSGE Models: Theory and Empirical Applications (2018)
Working Paper: The Pruned State-Space System for Non-Linear DSGE Models: Theory and Empirical Applications (2013)
Working Paper: The Pruned State-Space System for Non-Linear DSGE Models: Theory and Empirical Applications (2013)
Working Paper: The Pruned State-Space System for Non-Linear DSGE Models: Theory and Empirical Applications (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fda:fdaddt:2016-07

Access Statistics for this paper

More papers in Working Papers from FEDEA
Bibliographic data for series maintained by Carmen Arias ().