Bayesian estimation of a DSGE model with asset prices

Martin Kliem and Harald Uhlig ()

No 37/2013, Discussion Papers from Deutsche Bundesbank

Abstract: This paper presents a novel Bayesian method for estimating dynamic stochastic general equilibrium (DSGE) models subject to a constrained posterior distribution of the implied Sharpe ratio. We apply our methodology to a DSGE model with habit formation in consumption and leisure, using an estimate of the Sharpe ratio to construct the constraint. We show that the constrained estimation produces a quantitative model with both reasonable asset-pricing as well as business-cycle implications.

Keywords: Bayesian estimation; stochastic steady-state; prior choice; Sharpe ratio (search for similar items in EconPapers)
JEL-codes: C11 E32 E44 G12 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-dge, nep-ecm and nep-mac
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:372013

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