EconPapers    
Economics at your fingertips  
 

Estimating dynamic macroeconomic models: how informative are the data?

Daniel Beltran () and David Draper

Journal of the Royal Statistical Society Series C, 2018, vol. 67, issue 2, 501-520

Abstract: Central banks have long used dynamic stochastic general equilibrium models, which are typically estimated by using Bayesian techniques, to inform key policy decisions. This paper offers an empirical strategy that quantifies the information content of the data relative to that of the prior distribution. Using an off‐the‐shelf dynamic stochastic general equilibrium model applied to quarterly euro area data from 1970, quarter 3, to 2009, quarter 4, we show how Monte Carlo simulations can reveal parameters for which the model's structure obscures identification. By integrating out components of the likelihood function and conducting a Bayesian sensitivity analysis, we uncover parameters that are weakly informed by the data. The weak identification of some key structural parameters in our comparatively simple model should raise a red flag to researchers trying to draw valid inferences from, and to base policy on, complex large‐scale models featuring many parameters.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.1111/rssc.12238

Related works:
Working Paper: Estimating Dynamic Macroeconomic Models: How Informative Are the Data? (2016) Downloads
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:bla:jorssc:v:67:y:2018:i:2:p:501-520

Ordering information: This journal article can be ordered from
http://ordering.onli ... 1111/(ISSN)1467-9876

Access Statistics for this article

Journal of the Royal Statistical Society Series C is currently edited by R. Chandler and P. W. F. Smith

More articles in Journal of the Royal Statistical Society Series C from Royal Statistical Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2023-01-23
Handle: RePEc:bla:jorssc:v:67:y:2018:i:2:p:501-520