Data Revisions in the Estimation of DSGE Models
Miguel Casares () and
Jesús Vázquez Pérez
No 2012-06, DFAEII Working Papers from University of the Basque Country - Department of Foundations of Economic Analysis II
Revisions of US macroeconomic data are not white-noise. They are persistent, correlated with real-time data, and with high variability (around 80% of volatility observed in US real-time data). Their business cycle effects are examined in an estimated DSGE model extended with both real-time and final data. After implementing a Bayesian estimation approach, the role of both habit formation and price indexation fall significantly in the extended model. The results show how revision shocks of both output and inflation are expansionary because they occur when real-time published data are too low and the Fed reacts by cutting interest rates. Consumption revisions, by contrast, are countercyclical as consumption habits mirror the observed reduction in real-time consumption. In turn, revisions of the three variables explain 9.3% of changes of output in its long-run variance decomposition.
Keywords: data revisions; DSGE models; business cycles (search for similar items in EconPapers)
JEL-codes: C32 E30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
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Journal Article: DATA REVISIONS IN THE ESTIMATION OF DSGE MODELS (2016)
Working Paper: Data Revisions in the Estimation of DSGE models (2011)
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Dpto. de Fundamentos del Análisis Económico II, = Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
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