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The Pruned State-Space System for Non-Linear DSGE Models: Theory and Empirical Applications

Martin M. Andreasen, Jesus Fernandez-Villaverde () and Juan F Rubio-Ramirez ()

No 9442, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper studies the pruned state-space system for higher-order approximations to the solutions of DSGE models. For second- and third-order approximations, we derive the statistical properties of this system and provide closed-form expressions for first and second unconditional moments and impulse response functions. Thus, our analysis introduces GMM estimation for DSGE models approximated up to third-order and provides the foundation for indirect inference and SMM when simulation is required. We illustrate the usefulness of our approach by estimating a New Keynesian model with habits and Epstein-Zin preferences by GMM when using first and second unconditional moments of macroeconomic and financial data and by SMM when using additional third and fourth unconditional moments and non-Gaussian innovations.

Keywords: Epstein-Zin preferences; Higher-order perturbation approximation; Non-Gaussian innovations; Yield curve. (search for similar items in EconPapers)
JEL-codes: C15 C53 E30 (search for similar items in EconPapers)
Date: 2013-04
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Related works:
Journal Article: The Pruned State-Space System for Non-Linear DSGE Models: Theory and Empirical Applications (2018) Downloads
Working Paper: The Pruned State-Space System for Non-Linear DSGE Models: Theory and Empirical Applications (2016) Downloads
Working Paper: The Pruned State-Space System for Non-Linear DSGE Models: Theory and Empirical Applications (2013) Downloads
Working Paper: The Pruned State-Space System for Non-Linear DSGE Models: Theory and Empirical Applications (2013) Downloads
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