Identification Versus Misspecification in New Keynesian Monetary Policy Models
Stefan Laséen (),
Jesper Lindé and
Marco Ratto ()
No 13492, CEPR Discussion Papers from C.E.P.R. Discussion Papers
In this paper, we study identification and misspecification problems in standard closed and open-economy empirical New-Keynesian DSGE models used in monetary policy analysis. We find that problems with model misspecification still appear to be a first-order issue in monetary DSGE models, and argue that it is problems with model misspecification that may benefit the most from moving from a classical to a Bayesian framework. We also argue that lack of identification should neither be ignored nor be assumed to affect all DSGE models. Fortunately, identification problems can be readily assessed on a case-by-case basis, by applying recently developed pre-tests of identification.
Keywords: Bayesian estimation; Closed economy; DSGE model; Maximum Likelihood Estimation; Monte-Carlo methods; Open economy (search for similar items in EconPapers)
JEL-codes: C13 C51 E30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-ecm, nep-ets, nep-mac, nep-mon and nep-ore
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Journal Article: Identification versus misspecification in New Keynesian monetary policy models (2019)
Working Paper: Identification Versus Misspecification in New Keynesian Monetary Policy Models (2018)
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