Testing for Non-Fundamentalness

Mehdi Hamidi Sahneh ()

MPRA Paper from University Library of Munich, Germany

Abstract: Non-fundamentalness arises when observed variables do not contain enough information to recover structural shocks. This paper propose a new test to empirically detect non-fundamentalness, which is robust to the conditional heteroskedasticity of unknown form, does not need information outside of the specified model and could be accomplished with a standard F-test. A Monte Carlo study based on a DSGE model is conducted to examine the finite sample performance of the test. I apply the proposed test to the U.S. quarterly data to identify the dynamic effects of supply and demand disturbances on real GNP and unemployment.

Keywords: Non-Fundamentalness; Invertibility; Vector Autoregressive. (search for similar items in EconPapers)
JEL-codes: C32 C5 E3 (search for similar items in EconPapers)
Date: 2016-06-01
New Economics Papers: this item is included in nep-dge, nep-ecm, nep-ets, nep-mac and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:71924

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