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Comparing different data descriptors in Indirect Inference tests on DSGE models

A. Patrick Minford, Michael Wickens and Yongdeng Xu ()

Economics Letters, 2016, vol. 145, issue C, 157-161

Abstract: Indirect inference testing can be carried out with a variety of auxiliary models. Asymptotically these different models make no difference. However, in small samples power can differ. We explore small sample power with three different auxiliary models: a VAR, average Impulse Response Functions and Moments. The latter corresponds to the Simulated Moments Method. We find that in a small macro model there is no difference in power. But in a large complex macro model the power with Moments rises more slowly with increasing misspecification than with the other two which remain similar.

Keywords: Indirect Inference; DGSE model; Auxiliary models; Simulated Moments Method (search for similar items in EconPapers)
JEL-codes: C12 C32 C52 E1 (search for similar items in EconPapers)
Date: 2016
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Working Paper: Comparing different data descriptors in Indirect Inference tests on DSGE models (2017) Downloads
Working Paper: Comparing different data descriptors in Indirect Inference tests on DSGE models (2016) Downloads
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