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Back to square one: identification issues in DSGE models

Fabio Canova () and Luca Sala ()

No 715, Working Papers from Banco de España, Working Papers Homepage

Abstract: We investigate identifiability issues in DSGE models and their consequences for parameter estimation and model evaluation when the objective function measures the distance between estimated and model impulse responses. Observational equivalence, partial and weak identification problems are widespread and they lead to biased estimates, unreliable t-statistics and may induce investigators to select false models. We examine whether different objective functions affect identification and study how small samples interact with parameters and shock identification. We provide diagnostics and tests to detect identification failures and apply them to a state-of-the-art model.

Keywords: identification; impulse responses; DSGE models; small samples (search for similar items in EconPapers)
JEL-codes: C10 C52 E32 E50 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-ecm and nep-mac
Date: 2007-06
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Downloads: (external link)
http://www.bde.es/f/webbde/SES/Secciones/Publicaci ... o/07/Fic/dt0715e.pdf First version, June 2007 (application/pdf)

Related works:
Journal Article: Back to square one: Identification issues in DSGE models (2009) Downloads
Working Paper: Back to square one: identification issues in DSGE models (2009) Downloads
Working Paper: Back to square one: identification issues in DSGE models (2006) Downloads
Working Paper: Back to Square One: Identification Issues in DSGE Models (2006) Downloads
Working Paper: Back to square one: identification issues in DSGE models (2006) Downloads
Working Paper: Back to square one: Identification issues in DSGE models (2006) Downloads
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