Estimating time-varying DSGE models using minimum distance methods

Arbeitspapier

Following Giraitis, Kapetanios, and Yates (2014b), this paper uses kernel methods to estimate a seven variable time-varying (TV) vector autoregressive (VAR) model on the data set constructed by Smets and Wouters (2007). We apply an indirect inference method to map from this TV VAR to time variation in implied Dynamic Stochastic General Equilibrium (DSGE) parameters. We find that many parameters change substantially, particularly those defining nominal rigidities, habits and investment adjustment costs. In contrast to the 'Great Moderation' literature our monetary policy parameter estimates suggest that authorities tried to deliver a low and stable inflation from 1975 onwards, however, the severe adverse supply shocks in the 70s could have caused these policies to fail.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 768

Classification and Topics

• Classification: Wirtschaft ; Monetary Policy ; Policy Objectives; Policy Designs and Consistency; Policy Coordination ; General Outlook and Conditions ; Semiparametric and Nonparametric Methods: General ; Methodological Issues: General
• Subject: DSGE ; Structural change ; Kernel estimation ; Time-varying VAR ; Monetary policy shocks

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Giraitis, Liudas ; Kapetanios, George ; Theodoridis, Konstantinos ; Yates, Tony
• Event: Veröffentlichung
• (who): Queen Mary University of London, School of Economics and Finance
• (where): London
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/130782
• Last update: 10.03.2025, 11:44 AM CET