Bayesian prior elicitation in DSGE models: Macro- vs micropriors

Marco Lombardi and Giulio Nicoletti

Journal of Economic Dynamics and Control, 2012, vol. 36, issue 2, 294-313

Abstract: Bayesian approaches to the estimation of DSGE models are becoming increasingly popular. Prior knowledge is normally formalized either directly on deep parameters' values (‘microprior’) or indirectly, on macroeconomic indicators, e.g. moments of observable variables (‘macroprior’). We introduce a non-parametric macroprior which is elicited from impulse response functions and assess its performance in shaping posterior estimates. We find that using a macroprior can lead to substantially different posterior estimates. We probe into the details of our result, showing that model misspecification is likely to be responsible of that. In addition, we assess to what extent the use of macropriors is impaired by the need of calibrating some hyperparameters.

Keywords: DSGE models; Bayesian estimation; Prior distribution; Impulse response function (search for similar items in EconPapers)
JEL-codes: C11 C51 E30 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165188911001849
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Bayesian prior elicitation in DSGE models: macro- vs micro-priors (2011)
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:eee:dyncon:v:36:y:2012:i:2:p:294-313

DOI: 10.1016/j.jedc.2011.09.010

Access Statistics for this article

Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

More articles in Journal of Economic Dynamics and Control from Elsevier
Bibliographic data for series maintained by Catherine Liu ().