Identification versus misspecification in New Keynesian monetary policy models
Stefan Laséen (),
Jesper Lindé and
Marco Ratto ()
European Economic Review, 2019, vol. 113, issue C, 225-246
In this paper, we study identification and misspecification problems in standard closed and open-economy empirical New-Keynesian DSGE models used in monetary policy analysis. We find that problems with model misspecification still appear to be a first-order issue in monetary DSGE models, and argue that it is problems with model misspecification that may benefit the most from moving from a classical to a Bayesian framework. We also argue that lack of identification should neither be ignored nor be assumed to affect all DSGE models. Fortunately, identification problems can be readily assessed on a case-by-case basis, by applying recently developed pre-tests of identification.
Keywords: Bayesian estimation; Monte-Carlo methods; Maximum likelihood estimation; DSGE Model; Closed economy; Open economy (search for similar items in EconPapers)
JEL-codes: C13 C51 E30 (search for similar items in EconPapers)
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Working Paper: Identification Versus Misspecification in New Keynesian Monetary Policy Models (2019)
Working Paper: Identification Versus Misspecification in New Keynesian Monetary Policy Models (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:113:y:2019:i:c:p:225-246
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