Approximating time varying structural models with time invariant structures

Fabio Canova, Filippo Ferroni and Christian Matthes

No 10803, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The paper studies how parameter variation affects the decision rules of a DSGE model and structural inference. We provide diagnostics to detect parameter variations and to ascertain whether they are exogenous or endogenous. Identification and inferential distortions when a constant parameter model is incorrectly assumed are examined. Likelihood and VAR-based estimates of the structural dynamics when parameter variations are neglected are compared. Time variations in the financial frictions of a Gertler and Karadi's (2010) model are studied.

Keywords: Endogenous variations; Misspecification; Structural model; Time varying coefficients (search for similar items in EconPapers)
JEL-codes: C10 E27 E32 (search for similar items in EconPapers)
Date: 2015-09
New Economics Papers: this item is included in nep-dge, nep-ecm and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Related works:
Working Paper: Approximating time varying structural models with time invariant structures (2016)
Working Paper: Approximating time varying structural models with time invariant structures (2016)
Working Paper: Approximating time varying structural models with time invariant structures (2015)
Working Paper: Approximating Time Varying Structural Models With Time Invariant Structures (2015)
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