The Statistical Implications of Common Identifying Restrictions for DSGE Models

Stephen Morris
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Stephen Morris: UC San Diego

No 738, 2014 Meeting Papers from Society for Economic Dynamics

Abstract: I reveal identification failures in a well-known dynamic stochastic general equilibrium (DSGE) model, and study the statistical implications of common identifying restrictions. First, I provide a fully analytical methodology for determining all observationally equivalent values of the structural parameters in any parameter space. I show that either parameter admissibility or sign restrictions may yield global identification for some parameter realizations, but not for others. Second, I derive a "plug-in" maximum likelihood estimator, which requires no numerical search. I use this tool to demonstrate that the idiosyncratic identifying restriction directly impinges on both the location and distribution of the small-sample MLE, and compute correctly sized confidence intervals.

Date: 2014
New Economics Papers: this item is included in nep-dge and nep-ecm
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed014:738

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