Choosing the variables to estimate singular DSGE models: Comment

Iskrev, Nikolay and Ritto, Joao (2016): Choosing the variables to estimate singular DSGE models: Comment.

Abstract

In a recent article Canova et al. (2014) study the optimal choice of variables to use in the estimation of a simplified version of the Smets and Wouters (2007) model. In this comment we examine their conclusions by applying a different methodology to the same model. Our results call into question most of Canova et al. (2014) conclusions.

• Item Type: MPRA Paper
• Language: English
• Keywords: DSGE models, Observables, Identification, Information matrix, Cramér-Rao lower bounds
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General; C - Mathematical and Quantitative Methods > C9 - Design of Experiments; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles

References

Canova, F., F. Ferroni, and C. Matthes (2014): “Choosing the variables to estimate singular DSGE models,” Journal of Applied Econometrics, 29, 1099–1117

Iskrev, N. (2010): “Evaluating the strength of identification in DSGE models. An a priori approach,” Working paper series, Banco de Portugal.

Smets, F. and R. Wouters (2007): “Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach,” The American Economic Review, 97, 586–606.