A note on the identification of dynamic economic models with generalized shock processes

Christopher Phillip Reicher

No 1821, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: DSGE models with generalized shock processes have been a major area of research in recent years. In this paper, I show that the structural parameters governing DSGE models are not identified when the driving process behind the model follows an unrestricted VAR. This finding implies that parameter estimates derived from recent attempts to estimate DSGE models with generalized driving processes should be treated with caution, and that there exists a tradeoff between identification and the risk of model misspecification.

Keywords: identification; DSGE models; observational equivalence; maximum likelihood (search for similar items in EconPapers)
JEL-codes: C13 C32 E00 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1821

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