An Unintended Consequence of Using "Errors in Variables Shocks" in DSGE Models?

Adrian Pagan

No 114, NCER Working Paper Series from National Centre for Econometric Research

Abstract: This note shows that the common practice of adding on measurement errors or "errors in variables" when estimating DSGE models can imply that there is a lack of co-integration between model and data variables and also between data variables themselves. An analysis is provided of what the nature of the measurement error would be if it was desired to ensure co-integration. It is very unlikely that it would be the white noise shocks that are commonly used.

Keywords: DSGE models; shocks (search for similar items in EconPapers)
Pages: 7 pgaes
Date: 2016-09-12
New Economics Papers: this item is included in nep-dge, nep-ecm and nep-sog
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:qut:auncer:2016_05

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