Testing part of a DSGE model by Indirect Inference
A. Patrick Minford,
Michael Wickens and
Yongdeng Xu ()
No E2016/12, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section
We propose a new type of test. Its aim is to test subsets of the structural equations of a DSGE model. The test draws on the statistical inference for limited information models and the use of indirect inference to test DSGE models. Using Monte Carlo experiments on two subsets of equations of the Smets-Wouters model we show that the model has accurate size and good power in small samples. In a test of the Smets-Wouters model on US Great Moderation data we reject the speci…cation of the wage-price but not the expenditure sector, pointing to the …first as the source of overall model rejection.
Keywords: sub sectors of models; limited information; indirect inference; testing DSGE models equations; Monte Carlo; power; test size (search for similar items in EconPapers)
JEL-codes: C12 C32 C52 E1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-ecm and nep-mac
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Journal Article: Testing Part of a DSGE Model by Indirect Inference (2019)
Working Paper: Testing part of a DSGE model by Indirect Inference (2017)
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