Identifiability of Dynamic Stochastic General Equilibrium Models with Covariance Restrictions

Mohammad Taremi (), Farzad Esksndari () and Mohammad Bameni Moghadam ()
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Mohammad Taremi: Department of Mathematical Science and Computer, Faculty of Economics, Allameh Tabataba'i University
Farzad Esksndari: Department of Mathematical Science and Computer, Faculty of Economics, Allameh Tabataba'i University
Mohammad Bameni Moghadam: Department of Mathematical Science and Computer, Faculty of Economics, Allameh Tabataba'i University

Journal of Money and Economy, 2016, vol. 11, issue 3, 225-243

Abstract: In this paper, we study the identification problem of parameters of Dynamic Stochastic General Equilibrium Models with emphasis on structural constraints, in order to make the number of observable variables is equal to the number of exogenous variables. We derive a set of identifiability conditions and suggest a procedure for a thorough analysis of identification at each point in the parameters space. The procedure can be applied, before DSGE models are estimated, to determine where identification fails. We also use a Monte Carlo simulation and study the effect of restrictions on the estimate. The results show that the use of restrictions for estimation, when identification is reduced, leads us to inaccurate estimates and unreliable inference even when the number of observations is large.

Keywords: DSGE Model; Identifiability; Monte Carlo Simulation (search for similar items in EconPapers)
JEL-codes: B41 C13 C15 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:mbr:jmonec:v:11:y:2016:i:3:p:225-243

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