On ABCs (and Ds) of VAR representations of DSGE models

Massimo Franchi and Paolo Paruolo

No 2012/4, DSS Empirical Economics and Econometrics Working Papers Series from Centre for Empirical Economics and Econometrics, Department of Statistics, "Sapienza" University of Rome

Abstract: This paper shows that the poor man's invertibility condition in Fernandez-Villaverde et al. (2007) is, in general, sufficient but not necessary for fundamentalness; that is, a violation of this condition does not necessarily imply the impossibility of recovering the structural shocks of a DSGE via a VAR. The permanent income model in Fernandez-Villaverde et al. (2007) is used to illustrate this fact. A necessary and sufficient condition for fundamentalness is formulated and its relations with the poor man's invertibility condition are discussed.

Keywords: DSGE; VAR; invertibility; non-fundamentalness. (search for similar items in EconPapers)
Pages: 8 pages
Date: 2012-07
New Economics Papers: this item is included in nep-dge and nep-ecm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://www.dss.uniroma1.it/RePec/sas/wpaper/20124_Franchi_Paruolo.pdf First version, 2012 (application/pdf)

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Working Paper: On ABCs (and Ds) of VAR representations of DSGE models (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:sas:wpaper:20124

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