Lack of identification of parameters in a simple behavioral macroeconomic model

Thomas Lux

No 2024-02, Economics Working Papers from Christian-Albrechts-University of Kiel, Department of Economics

Abstract: Identifiability of the parameters is an important precondition for consistent estimation of models designed to describe empirical phenomena. Nevertheless, many estimation exercises proceed without a preliminary investigation into the identifiability of its models. As a consequence, the estimates could be essentially meaningless if convergence to the 'true' parameters is not guaranteed in the pertinent problem. We provide some evidence here that such a lack of identification is responsible for the inconclusive results reported in recent literature on parameter estimates for a certain class of nonlinear behavioral New Keynesian models. We also show that identifiability depends on the subtle details of the model structure. Hence, a careful investigation of identifiability should preceed any attempt at estimation of such models.

Keywords: Behavioral macro; identification; forecast heuristics (search for similar items in EconPapers)
JEL-codes: C53 E12 E32 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-dge and nep-ecm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cauewp:300523

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