Open Access
Assessing Structural VARs ∗ (Preliminary)
Lawrence J. Christiano,Martin Eichenbaum,Robert J. Vigfusson +2 more
- 01 Jan 2005
TL;DR: In this article, the authors used artificial data generated from variants of a simple real business cycle model to evaluate the ability of structural VARs to estimate the dynamic response of the economy to shocks.
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Abstract: We use artificial data generated from variants of a simple real business cycle model to evaluate the ability of structural VARs to estimate the dynamic response of the economy to shocks. All the variants of the model economies considered in this paper imply that VAR-based methods that use short run restrictions are remarkably accurate. We also consider the performance of standard VAR-based estimators when long-run identifying restrictions are used. The parameterization of our model that is estimated by maximum likelihood implies that these methods also work well, in terms of bias and in terms of standard estimators of the degree of sampling variation. When we consider the models in Chari, Kehoe and McGrattan (2005), we confirm their finding that estimated impulse response functions based on long-run restrictions are distorted. We diagnose the reasons for the distortions, and build on our diagnosis to develop an improved estimator of impulse response functions based on long-run restrictions. It is not clear, however, whether the problems identified by CKM are of concern in practice. The CKM models are rejected overwhelmingly by the data.
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Citations
VAR-based estimation of Euler equations with an application to New Keynesian pricing
TL;DR: In this paper, a reverse-engineering approach is proposed to constrain the system formed by the Euler equation and the VAR process to yield a unique stable rational expectations equilibrium.
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Empirical analysis of monetary policy: Croatia vs. Slovenia
TL;DR: In this paper, the authors tried to explain empirical causation between the exports and the real exchange rate by developing a simple model, the model is based on the relationship of exports to: real interest rates differential, foreign demand for domestic goods and real exchange ratio.
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A Dynamic Index Model for Large Cross Sections
Danny Quah,Thomas J. Sargent +1 more
- 01 Jan 1993
TL;DR: In this article, a dynamic index model for random fields is proposed to study the dynamic comovements of sectoral employment in the US economy, and the dynamics of employment in sixty sectors is well explained using two unobservable factors.
References
Macroeconomics and reality
TL;DR: In this article, the authors argue that the style in which their builders construct claims for a connection between these models and reality is inappropriate, to the point at which claims for identification in these models cannot be taken seriously.
Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy
TL;DR: In this article, the authors present a model embodying moderate amounts of nominal rigidities that accounts for the observed inertia in inflation and persistence in output, and the key features of their model are those that prevent a sharp rise in marginal costs after an expansionary shock to monetary policy.
An estimated dynamic stochastic general equilibrium model of the euro area
Frank Smets,Raf Wouters +1 more
TL;DR: In this paper, a dynamic stochastic general equilibrium (DSGE) model with sticky prices and wages for the euro area was developed and estimated with Bayesian techniques using seven key macroeconomic variables: GDP, consumption, investment, prices, real wages, employment, and the nominal interest rate.
An estimated dynamic stochastic general equilibrium model of the euro area. NBB Working Paper Nr. 35
Frank Smets,Raf Wouters +1 more
- 01 Oct 2002
TL;DR: In this article, a dynamic stochastic general equilibrium (DSGE) model with sticky prices and wages for the euro area was developed and estimated with Bayesian techniques using seven key macroeconomic variables: GDP, consumption, investment, prices, real wages, employment and the nominal interest rate.
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The Dynamic Effects of Aggregate Demand and Supply Disturbances
Olivier Blanchard,Danny Quah +1 more
TL;DR: In this article, the authors interpret fluctuations in GNP and unemployment as due to two types of disturbances: disturbances that have a permanent effect on output and disturbances that do not, and they interpret the first as supply disturbances, the second as demand disturbances.