Structural Estimation with Unstructured Data

Sara Casella, Jesus Fernandez-Villaverde, Stephen Hansen (), Ryohei Oishi () and Minchul Shin
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Stephen Hansen: https://profiles.ucl.ac.uk/91767-stephen-hansen

No 2620, Working Papers from Federal Reserve Bank of Dallas

Abstract: Standard macroeconomic data do not cleanly separate the systematic and nonsystematic components of monetary policy. We show that incorporating unstructured text data into the structural estimation of a DSGE model can sharpen this distinction. We augment a standard state-space model with a non-core measurement block that links structural shocks to time series derived from FOMC transcripts, using a spike-and-slab prior to let the data select which series are informative. In a medium-scale New Keynesian model for the U.S., incorporating text improves predictive performance and materially alters structural inference: the new model estimates a lower response of the policy rate to inflation, higher price stickiness and lower price indexation, implying a flatter and less backward-looking price Phillips curve.

Keywords: unstructured data; text as data; DSGE models; spike-and-slab priors; monetary policy; Phillips curve; FOMC transcripts (search for similar items in EconPapers)
Date: 2026-07-31
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DOI: 10.24149/wp2620

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