Information criteria for impulse response function matching estimation of DSGE models

Alastair Hall, Atsushi Inoue, James Nason and Barbara Rossi

Journal of Econometrics, 2012, vol. 170, issue 2, 499-518

Abstract: We propose new information criteria for impulse response function matching estimators (IRFMEs). These estimators yield sampling distributions of the structural parameters of dynamic stochastic general equilibrium (DSGE) models by minimizing the distance between sample and theoretical impulse responses. First, we propose an information criterion to select only the responses that produce consistent estimates of the true but unknown structural parameters: the Valid Impulse Response Selection Criterion (VIRSC). The criterion is especially useful for mis-specified models. Second, we propose a criterion to select the impulse responses that are most informative about DSGE model parameters: the Relevant Impulse Response Selection Criterion (RIRSC). These criteria can be used in combination to select the subset of valid impulse response functions with minimal dimension that yields asymptotically efficient estimators. The criteria are general enough to apply to impulse responses estimated by VARs, local projections, and simulation methods. We show that the use of our criteria significantly affects estimates and inference about key parameters of two well-known new Keynesian DSGE models. Monte Carlo evidence indicates that the criteria yield gains in terms of finite sample bias as well as offering tests statistics whose behavior is better approximated by the first order asymptotic theory. Thus, our criteria improve existing methods used to implement IRFMEs.

JEL-codes: C32 C52 C53 E47 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (46)

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Related works:
Working Paper: Information Criteria for Impulse Response Function Matching Estimation of DSGE Models (2010)
Working Paper: INFORMATION CRITERIA FOR IMPULSE RESPONSE FUNCTION MATCHING ESTIMATION OF DSGE MODELS (2009)
Working Paper: Information Criteria for Impulse Response Function Matching Estimation of DSGE Models (2009)
Working Paper: Information Criteria for Impulse Response Function Matching Estimation of DSGE Models (2007)
Working Paper: Information criteria for impulse response function matching estimation of DSGE models (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:170:y:2012:i:2:p:499-518

DOI: 10.1016/j.jeconom.2012.05.019

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