Efficient and robust inference of models with occasionally binding constraints

Massimo Giovannini (), Philipp Pfeiffer and Marco Ratto

No 2021-03, JRC Working Papers in Economics and Finance from Joint Research Centre, European Commission

Abstract: This paper proposes a piecewise-linear Kalman filter (PKF) to estimate DSGE models with occasionally binding constraints. This method expands the set of models suitable for nonlinear estimation. It straightforwardly handles missing data, non-singularity (more shocks than observed time series), and large-scale models. We provide several applications to highlight its efficiency and robustness compared to existing methods. Our toolkit integrates the PKF into Dynare, the most popular software in DSGE modeling.

Keywords: DSGE; occasionally binding constraints; nonlinear estimation; Piecewise Kalman Filter (search for similar items in EconPapers)
JEL-codes: C11 C32 C51 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2021-04
New Economics Papers: this item is included in nep-dge, nep-ecm, nep-ets and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published by Publications Office of the European Union, 2021

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Persistent link: https://EconPapers.repec.org/RePEc:jrs:wpaper:202103

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