Monetary Policy Analysis with Potentially Misspecified Models
American Economic Review
vol. 99,
no. 4, September 2009
(pp. 1415-50)
Abstract
Policy analysis with potentially misspecified dynamic stochastic general equilibrium (DSGE) models faces two challenges: estimation of parameters that are relevant for policy trade-offs, and treatment of the deviations from the cross-equation restrictions. Using post-1982 US data, we study the robustness of the policy prescriptions from a state-of-the-art DSGE model with respect to two approaches to model misspecification pursued in the recent literature: (i) adding shocks to the DSGE model and/or generalizing the processes followed by these shocks; and (ii) explicit modeling of deviations from cross-equation restrictions (DSGE-VAR). (JEL C51, E13, E43, E52, E58)Citation
Del Negro, Marco, and Frank Schorfheide. 2009. "Monetary Policy Analysis with Potentially Misspecified Models." American Economic Review, 99 (4): 1415-50. DOI: 10.1257/aer.99.4.1415Additional Materials
JEL Classification
- C51 Model Construction and Estimation
- E13 General Aggregative Models: Neoclassical
- E43 Determination of Interest Rates; Term Structure of Interest Rates
- E52 Monetary Policy
- E58 Central Banks and Their Policies