Testing a DSGE model of the EU using indirect inference

David Meenagh, A. Patrick Minford and Michael Wickens

CDMA Conference Paper Series from Centre for Dynamic Macroeconomic Analysis

Abstract: We use the method of indirect inference, using the bootstrap, to test the Smets and Wouters model of the EU against a VAR auxiliary equation describing their data; the test is based on the Wald statistic. We find that their model generates excessive variance compared with the data. But their model passes the Wald test easily if the errors have the properties assumed by SW but scaled down. We compare a New Classical version of the model which also passes the test easily if error properties are chosen using New Classical priors (notably excluding shocks to preferences). Both versions have (different) difficulties fitting the data if the actual error properties are used.

Keywords: Bootstrap; DSGE Model; VAR model; Model of EU; indirect inference; Wald statistic. (search for similar items in EconPapers)
JEL-codes: C12 C32 (search for similar items in EconPapers)
Date: 2008-09
New Economics Papers: this item is included in nep-cba, nep-dge, nep-ecm and nep-eec
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Testing a DSGE Model of the EU Using Indirect Inference (2009)
Working Paper: Testing a DSGE model of the EU using indirect inference (2008)
Working Paper: Testing a DSGE Model of the EU Using Indirect Inference (2008)
Working Paper: Testing a DSGE model of the EU using indirect inference (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:san:cdmacp:0801

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