On the statistical identification of DSGE models

Agostino Consolo, Carlo A. Favero and Alessia Paccagnini

Open Access publications from School of Economics, University College Dublin

Abstract: Dynamic Stochastic General Equilibrium (DSGE) models are now considered attractive by the profession not only from the theoretical perspective but also from an empirical standpoint. As a consequence of this development, methods for diagnosing the fit of these models are being proposed and implemented. In this article we illustrate how the concept of statistical identification, that was introduced and used by Spanos [Spanos, Aris, 1990. The simultaneous-equations model revisited: Statistical adequacy and identification. Journal of Econometrics 44, 87–105] to criticize traditional evaluation methods of Cowles Commission models, could be relevant for DSGE models. We conclude that the recently proposed model evaluation method, based on the DSGE–VAR(?), might not satisfy the condition for statistical identification. However, our application also shows that the adoption of a FAVAR as a statistically identified benchmark leaves unaltered the support of the data for the DSGE model and that a DSGE–FAVAR can be an optimal forecasting model.

Keywords: Bayesian analysis; Dynamic stochastic general equilibrium model; Model evaluation; Statistical identification; Vector autoregression; Factor-augmented vector autoregression (search for similar items in EconPapers)
Pages: 17 pages
Date: 2009-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

Published in: Journal of Econometrics, 150(1) 2009-05

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http://hdl.handle.net/10197/7586 Open Access version, 2009 (application/pdf)

Related works:
Journal Article: On the statistical identification of DSGE models (2009)
Working Paper: On the Statistical Identification of DSGE Models (2009)
Working Paper: On the Statistical Identification of DSGE Models (2007)
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