A Note on the Role of the Natural Condition of Control in the Estimation of DSGE Models

Martin Fukaè () and Vladimír Havlena ()
Additional contact information
Martin Fukaè: Federal Reserve Bank of Kansas City, http://www.kc.frb.org/
Vladimír Havlena: Czech Technical University in Prague (ÈVUT), http://www.cvut.cz/cs
Authors registered in the RePEc Author Service: Martin Fukač

Czech Journal of Economics and Finance (Finance a uver), 2011, vol. 61, issue 5, 453-466

Abstract: This paper is written by authors from the technical and economic fields who are motivated to find a common language and views on the problem of the optimal use of information in model estimation. The center of their interest is the natural condition of control – a common assumption in Bayesian estimation in the technical sciences, and one which may be violated in economic applications. In estimating dynamic stochastic general equilibrium (DSGE) models, typically only a subset of endogenous variables is treated as measured even if additional data sets are available. The natural condition of control dictates the exploitation of all available information, which improves model adaptability and estimate efficiency. The authors illustrate their points on a basic RBC model.

Keywords: natural condition of control; Bayesian estimation; DSGE model; model adaptability (search for similar items in EconPapers)
JEL-codes: C11 C18 (search for similar items in EconPapers)
Date: 2011
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Working Paper: Note on the role of natural condition of control in the estimation of DSGE models (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:61:y:2011:i:5:p:453-466

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