Back to square one: Identification issues in DSGE models

Fabio Canova and Luca Sala ()

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We investigate identifiability issues in DSGE models and their consequences for parameter estimation and model evaluation when the objective function measures the distance between estimated and model impulse responses. We show that observational equivalence, partial and weak identification problems are widespread, that they lead to biased estimates, unreliable t-statistics and may induce investigators to select false models. We examine whether different objective functions affect identification and study how small samples interact with parameters and shock identification. We provide diagnostics and tests to detect identification failures and apply them to a state-of-the-art model.

Keywords: Identification; Impulse Responses; DSGE models; small samples (search for similar items in EconPapers)
JEL-codes: C10 C52 E32 E50 (search for similar items in EconPapers)
Date: 2005-05, Revised 2006-09
New Economics Papers: this item is included in nep-bec, nep-ecm and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (74)

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https://econ-papers.upf.edu/papers/927.pdf Whole Paper (application/pdf)

Related works:
Journal Article: Back to square one: Identification issues in DSGE models (2009)
Working Paper: Back to square one: identification issues in DSGE models (2009)
Working Paper: Back to square one: identification issues in DSGE models (2007)
Working Paper: Back to square one: identification issues in DSGE models (2006)
Working Paper: Back to Square One: Identification Issues in DSGE Models (2006)
Working Paper: Back to square one: identification issues in DSGE models (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:927

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