Trend agnostic one-step estimation of DSGE models

Ferroni, F (2011) Trend agnostic one-step estimation of DSGE models B.E. Journal of Macroeconomics, 11 (1).

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Abstract

DSGE models are currently estimated with a two-step approach: the data is first transformed and then DSGE structural parameters are estimated. Two-step procedures have problems, ranging from component misspecification to incorrect assumptions about the correlation between cyclical and non-cyclical components. In this paper, I present a one-step method, where DSGE structural parameters are jointly estimated with filtering parameters. First, I illustrate the properties of the one-step procedures using simulated data. Then, I show that different data transformations imply different structural estimates and that two-step approaches lack a statistical-based criterion to select amongst them. The one-step approach allows to choose the most likely specification of the non-cyclical component for individual series and/or to construct robust estimates by Bayesian averaging. The role of the investment specific shock as source of GDP volatility is reconsidered. ©2011 Berkeley Electronic Press. All rights reserved.

Item Type:	Article
Authors :	Name Email ORCID Ferroni, F f.ferroni@surrey.ac.uk
Date :	2011
Identification Number :	10.2202/1935-1690.2248
Depositing User :	Symplectic Elements
Date Deposited :	16 May 2017 15:14
Last Modified :	17 May 2017 14:33
URI:	http://epubs.surrey.ac.uk/id/eprint/818258

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