Measurement with Some Theory: a New Approach to Evaluate Business Cycle Models (with appendices)

Matthias Paustian and Fabio Canova

No 511, Working Papers from Barcelona School of Economics

Abstract: We propose a method to evaluate cyclical models which does not require knowledge of the DGP and the exact specification of the aggregate decision rules. We derive robust restrictions in a class of models; use some to identify structural shocks in the data and others to evaluate the class or contrast sub-models. The approach has good properties, even in small samples and when the likelihood is misspecified. We showhow to sort out the relevance of a certain friction (the presence of rule-of-thumb consumers) in a standard class of models.

Keywords: sign restrictions; shock identification; model validation; misspecification (search for similar items in EconPapers)
JEL-codes: C32 E32 (search for similar items in EconPapers)
Date: 2015-09
References: Add references at CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
https://bw.bse.eu/wp-content/uploads/2015/09/511-file.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:511

Access Statistics for this paper

More papers in Working Papers from Barcelona School of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Bruno Guallar ().