Time-Varying Parameter Four-Equation DSGE Model

Gupta Rangan () and Sun Xiaojin ()
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Gupta Rangan: Department of Economics, 56410 University of Pretoria , Pretoria, South Africa
Sun Xiaojin: Department of Economics and Finance, University of Texas at El Paso, El Paso, TX, USA

Studies in Nonlinear Dynamics & Econometrics, 2025, vol. 29, issue 2, 235-246

Abstract: We build the time-varying parameter feature into the (Sims, E., J. C. Wu, and J. Zhang. 2023. “The Four-Equation New Keynesian Model.” The Review of Economics and Statistics 105 (4): 931–47) four-equation Dynamic Stochastic General Equilibrium (DSGE) model in this paper. We find that both parameters and impulse responses of the variables in the four-equation DSGE model exhibit significant variation over time. Allowing model parameters to vary over time also improves the model’s forecasting performance.

Keywords: four-equation DSGE; time-varying parameter; forecasting (search for similar items in EconPapers)
JEL-codes: C52 C53 E32 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1515/snde-2023-0010

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