Confronting model misspecification in macroeconomics

Daniel Waggoner and Tao Zha

No 2010-18, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: We confront model misspecifications in macroeconomics by proposing an analytic framework for merging multiple models. This framework allows us to address uncertainty about models and parameters simultaneously and trace out the historical periods in which one model dominates other models. We apply the framework to a richly parameterized dynamic stochastic general equilibrium (DSGE) model and a corresponding Bayesian vector autoregressive model. The merged model, fitting the data better than both individual models, substantially alters economic inferences about the DSGE parameters and the implied impulse responses.

Date: 2010
New Economics Papers: this item is included in nep-cba and nep-dge
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Related works:
Journal Article: Confronting model misspecification in macroeconomics (2012)
Working Paper: Confronting Model Misspecification in Macroeconomics (2012)
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