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Oxford Bulletin of Economics and Statistics
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We develop a simulation-based finite-sample identification-robust confidence-set estimation method for DSGE models by searching for insignificant discrepancies between relevant reduced reduced forms from their DSGE-restricted population counterpart. Our method controls size in empirically-relevant small samples and outperforms asymptotically justified methods in this regard. We find serious identification problems in most parameters of a canonical micro-founded three-equation New Keynesian DSGE model. After accounting for weak identification and small sample size, we find no conclusive evidence that the ‘pre-Great Moderation’ era conforms with a passive monetary policy rule corresponding to indeterminacy, as argued in the literature.
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Scandinavian Journal of Economics
AbstractUsing an empirical New‐Keynesian model with optimal discretionary monetary policy, we estimate key parameters—the central bank's preference parameters; the degree of forward‐looking behavior in the determination of inflation and output; and the variances of inflation and output shocks—to match some broad characteristics of U.S. data. The parameterization we obtain implies a small concern for output stability but a large preference
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arXiv: General Economics
This paper analyzes identification issues of a behavorial New Keynesian model and estimates it using likelihood-based and limited-information methods with identification-robust confidence sets. The model presents some of the same difficulties that exist in simple benchmark DSGE models, but the analytical solution is able to indicate in what conditions the cognitive discounting parameter (attention to the future) can be identified and the robust estimation methods is able to confirm its importance for explaining the proposed behavioral model.
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Modern policy analysis makes extensive use of dynamic stochastic general equilibrium (DSGE) models. These models differ significantly from earlier generations of large-scale econometric models. I review what I see as major progress in the ability of economists to conduct model-based policy analysis. This progress has come through the evolution in the types of models being used and in a refinement of the types of questions asked of these models.1
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