DSGE Models Overview Slides

DSGE Models Overview Slides - NBER Summer Institute Whats...

Info iconThis preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon
Revised July 23, 2008 8-1 NBER Summer Institute What’s New in Econometrics: Time Series Lecture 8 July 15, 2008 Econometrics of DSGE Models
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Revised July 23, 2008 8-2 Outline 1) DSGE models and questions of interest 2) Model solution 3) Estimation: GMM 4) Estimation: Simulated GMM 5) Estimation: Maximum Likelihood 6) Estimation: Bayes 7) Inference, identification, and weak identification
Background image of page 2
Revised July 23, 2008 8-3 1) DSGE Models and Questions of Interest DSGEs can be used to address serious (real-world) empirical questions: Ask quantitative counterfactual policy questions Make conditional forecasts Examine effects of past policy changes (effects on means and variances, e.g. Great Moderation debate) Solve for optimal policies A big breakthrough has been the development of numerical and conceptual methods that permit moving from calibration to estimation (Sargent (1989), Ireland (2000), Smets-Wouters (2003)). This talk : the econometrics (estimation and inference) of DSGE modeling Briefly review specification and solution Focus will be on solved linearized models (models that have been written in state space form)
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Revised July 23, 2008 8-4 Overview of the standard DSGE methodology 1) Specify nonlinear optimization model 2) Obtain Euler equations At this point, can estimate by GMM (single equation or system) 3) Log linearize 4) Solve the model (solve out expectations) – log linearization 5) Put into state space form 6) Estimation options: a) Moment matching (match impulse response functions, possibly using simulation methods) b) Maximum Likelihood c) Bayes methods 7) Inference and evaluation References to extensions will be given below
Background image of page 4
Revised July 23, 2008 8-5 Overview of the standard DSGE methodology, ctd There are some good recent references: Textbooks/monographs: Canova, F. (2007), Methods for Applied Macroeconomic Research , Princeton: Princeton University Press. Dejong, D.N. and C. Dave (2007), Structural Macroeconomics , Princeton: Princeton University Press Lecture Notes Christiano L.J. (2007), “A Short Course on Estimation, Solution and Policy Analysis using Equilibrium Monetary Models,” (extensive slides are on Christiano’s Web site)
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Revised July 23, 2008 8-6 Outline 1) DSGE models and questions of interest 2) Model solution 3) Estimation: GMM 4) Estimation: Simulated GMM 5) Estimation: Maximum Likelihood 6) Estimation: Bayes 7) Inference, identification, and weak identification
Background image of page 6
2) Model Solution The steps: Euler equations Linearize Example : the linearized Gali, López-Salido, Vallés (2003) model: Calvo Pricing/NKPC: π t = β E t t +1 + κ x t intertemporal consumption: x t = – σ –1 ( r t E t t +1 ) + E t x t +1 * t rr monetary policy: r t = (1– α ) φ t + (1– ) x x t + r t –1 + u t natural interest rate: = ρΔ a t +(1+ ) –1 (1– λ ) τ t * t rr processes for shocks: Δ a t = a t –1 + a t η u t = δ u t –1 + u t t = λτ t –1 + t Model parameters (12): θ = ( , , , , z , , ρ , , , 2 a , 2 u , 2 t ) Revised July 23, 2008 8-7
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Model solution, ctd.
Background image of page 8
Image of page 9
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 12/26/2011 for the course ECON 245a taught by Professor Staff during the Fall '08 term at UCSB.

Page1 / 57

DSGE Models Overview Slides - NBER Summer Institute Whats...

This preview shows document pages 1 - 9. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online