News shocks or parametric indeterminacy? An observational equivalence result in linear rational expectations models

Marco Sorge

Economics Letters, 2012, vol. 114, issue 2, 198-200

Abstract: This paper studies identification in linear rational expectations models with news shocks. We show that news-driven models and indeterminate equilibrium economies with i.i.d. fundamentals are observationally equivalent. This finding calls for carefully designing empirical investigations of news shocks in estimated DSGE models.

Keywords: Rational expectations; News shocks; Parametric indeterminacy; Observational equivalence (search for similar items in EconPapers)
JEL-codes: C1 E32 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:114:y:2012:i:2:p:198-200

DOI: 10.1016/j.econlet.2011.09.028

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