Is Time an Illusion? A Bootstrap Likelihood Ratio Approach to Testing Shock Transmission Delays in DSGE Models

Giovanni Angelini (g.angelini@unibo.it), Luca Fanelli (luca.fanelli@unibo.it) and Marco Sorge
Additional contact information
Giovanni Angelini: Università di Bologna

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: Recently developed models of the business cycle exhibit a recursive timing structure, which enforces delayed propagation of exogenous shocks driving short-run dynamics. We propose a simple empirical strategy to test for the relevance of timing restrictions and ensuing shock transmission delays in general DSGE environments. Based on a bootstrap maximum likelihood estimator, our approach mitigates over-rejection concerns typically arising from conventional tests of non-linear hypotheses that exploit first-order asymptotic approximations. We showcase the empirical usefulness of the testing procedure by means of numerical simulations of a workhorse model of the monetary transmission mechanism.

Keywords: DSGE models; Timing restrictions; Transmission delays. (search for similar items in EconPapers)
JEL-codes: C1 C3 E3 E5 (search for similar items in EconPapers)
Date: 2022-09-22
New Economics Papers: this item is included in nep-dge and nep-ecm
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.csef.it/WP/wp653.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:653

Access Statistics for this paper

More papers in CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy Contact information at EDIRC.
Bibliographic data for series maintained by Dr. Maria Carannante (info@csef.it).