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DSGE Models under Imperfect Information: A Dynare-based Toolkit

Paul Levine (), Joseph Pearlman and Bo Yang

No 520, School of Economics Discussion Papers from School of Economics, University of Surrey

Abstract: This paper describes a Dynare-based toolbox which solves, simulates and estimates DSGE rational expectations (RE) models under perfect or imperfect information on the part of agents. The toolbox also delivers tests and conditions for exact and approximate invertibility providing information as to how well VAR residuals map the structural shocks in the RE solution to the DSGE model. Seven working examples come with the package including a version of the Smets and Wouters (2007) model and a standard small-scale New Keyesian (NK) DSGE model. The estimation exercise is conducted on both the NK and Smets-Wouters models. The paper provides alternative estimation results and an assessment for fundamentalness of structural shocks assuming that RE agents do not observe all current state variables (including shock processes) and only have an imperfect information set. Sections of the paper also examine the impulse response functions and unconditional second moments of the estimated model and discuss endogenous persistence.

Pages: 80 pages
Date: 2020-12
New Economics Papers: this item is included in nep-dge
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:sur:surrec:0520

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