Impulse Response Matching Estimators for DSGE Models

Lutz Kilian, Atsushi Inoue and Pablo Guerron

No 10298, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: One of the leading methods of estimating the structural parameters of DSGE models is the VAR-based impulse response matching estimator. The existing asymptotic theory for this estimator does not cover situations in which the number of impulse response parameters exceeds the number of VAR model parameters. Situations in which this order condition is violated arise routinely in applied work. We establish the consistency of the impulse response matching estimator in this situation, we derive its asymptotic distribution, and we show how this distribution can be approximated by bootstrap methods. Our methods of inference remain asymptotically valid when the order condition is satisfied, regardless of whether the usual rank condition for the application of the delta method holds. Our analysis sheds new light on the choice of the weighting matrix and covers both weakly and strongly identified DSGE model parameters. We also show that under our assumptions special care is needed to ensure the asymptotic validity of Bayesian methods of inference. A simulation study suggests that the frequentist and Bayesian point and interval estimators we propose are reasonably accurate infinite samples. We also show that using these methods may affect the substantive conclusions in empirical work.

Keywords: Structual estimation; Dsge; Var; Impulse response; Nonstandard asymptotics; Bootstrap; Weak identification; Robust inference (search for similar items in EconPapers)
JEL-codes: C32 C52 E30 E50 (search for similar items in EconPapers)
Date: 2014-12
New Economics Papers: this item is included in nep-dge, nep-mac and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Impulse response matching estimators for DSGE models (2017)
Working Paper: Impulse Response Matching Estimators for DSGE Models (2016)
Working Paper: Impulse Response Matching Estimators for DSGE Models (2016)
Working Paper: Impulse response matching estimators for DSGE models (2014)
Working Paper: Impulse response matching estimators for DSGE models (2014)
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