How Structural Are Structural Parameters?

Jesus Fernandez-Villaverde and Juan F Rubio-Ramirez

No 13166, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper studies how stable over time are the so-called "structural parameters" of dynamic stochastic general equilibrium (DSGE) models. To answer this question, we estimate a medium-scale DSGE model with real and nominal rigidities using U.S. data. In our model, we allow for parameter drifting and rational expectations of the agents with respect to this drift. We document that there is strong evidence that parameters change within our sample. We illustrate variations in the parameters describing the monetary policy reaction function and in the parameters characterizing the pricing behavior of firms and households. Moreover, we show how the movements in the pricing parameters are correlated with inflation. Thus, our results cast doubts on the empirical relevance of Calvo models.

JEL-codes: C11 C15 E10 E32 (search for similar items in EconPapers)
Date: 2007-06
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
Note: EFG
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Citations: View citations in EconPapers (142)

Published as How Structural Are Structural Parameters? , Jesús Fernández-Villaverde, Juan F. Rubio-Ramírez. in NBER Macroeconomics Annual 2007, Volume 22 , Acemoglu, Rogoff, and Woodford. 2008

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Chapter: How Structural Are Structural Parameters? (2008)
Working Paper: How Structural Are Structural Parameters? (2007)
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