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The Pruned State-Space System for Non-Linear DSGE Models: Theory and Empirical Applications

Martin M. Andreasen (), Jesus Fernandez-Villaverde () and Juan F Rubio-Ramirez ()
Additional contact information
Martin M. Andreasen: Aarhus University and CREATES, Postal: Department of Economics and Business, Fuglesangs Allé 4, 8210 Aarhus V, Denmark

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: This paper studies the pruned state-space system for higher-order approximations to the solutions of DSGE models. For second- and third-order approximations, we derive the statistical properties of this system and provide closed-form expressions for ?first and second unconditional moments and impulse response functions. Thus, our analysis introduces GMM estimation for DSGE models approximated up to third-order and provides the foundation for indirect inference and SMM when simulation is required. We illustrate the usefulness of our approach by estimating a New Keynesian model with habits and Epstein-Zin preferences by GMM when using ?rst and second unconditional moments of macroeconomic and ?nancial data and by SMM when using additional third and fourth unconditional moments and non-Gaussian innovations.

JEL-codes: C15 C53 E30 (search for similar items in EconPapers)
Pages: 64
Date: 2013-11-04
New Economics Papers: this item is included in nep-dge, nep-ecm, nep-ets and nep-ore
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ftp://ftp.econ.au.dk/creates/rp/13/rp13_12.pdf (application/pdf)

Related works:
Journal Article: The Pruned State-Space System for Non-Linear DSGE Models: Theory and Empirical Applications (2018) Downloads
Working Paper: The Pruned State-Space System for Non-Linear DSGE Models: Theory and Empirical Applications (2016) Downloads
Working Paper: The Pruned State-Space System for Non-Linear DSGE Models: Theory and Empirical Applications (2013) Downloads
Working Paper: The Pruned State-Space System for Non-Linear DSGE Models: Theory and Empirical Applications (2013) Downloads
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