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Smets, Frank, and
Rafael Wouters. 2007. "Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach."
,
97(3): 586-606.
Show Article Details
DOI: 10.1257/aer.97.3.586
Abstract:Using a Bayesian likelihood approach, we estimate a dynamic stochastic general
equilibrium model for the US economy using seven macroeconomic time series. The
model incorporates many types of real and nominal frictions and seven types of
structural shocks. We show that this model is able to compete with Bayesian Vector
Autoregression models in out-of-sample prediction. We investigate the relative
empirical importance of the various frictions. Finally, using the estimated model, we
address a number of key issues in business cycle analysis: What are the sources of
business cycle fluctuations? Can the model explain the cross correlation between
output and inflation? What are the effects of productivity on hours worked? What
are the sources of the "Great Moderation"? (JEL D58, E23, E31, E32)
Additional links:
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Link to Appendix
Authors:
Smets, Frank
Wouters, Rafael
JEL Classifications:
:
None
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