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| Title: | | Testing DSGE models by indirect inference and other methods: Some Monte Carlo experiments  |
| Authors: | | Vo Phuong Mai Le Meenagh, David Minford, Patrick Wickens, Michael |
| Issue Date: | | 2012 |
| Series/Report no.: | | Cardiff Economics Working Papers E2012/15 |
| Abstract: | | Using Monte Carlo experiments, we examine the performance of Indirect Inference tests of DSGE models, usually versions of the Smets-Wouters New Keynesian model of the US postwar period. We compare these with tests based on direct inference (using the Likelihood Ratio), and on the Del Negro-Schorfheide DSGE-VAR weight. We find that the power of all three tests is substantial so that a false model will tend to be rejected by all three; but that the power of the indirect inference tests are by far the greatest, necessitating re-estimation by indirect inference to ensure that the model is tested in its fullest sense. |
| Subjects: | | bootstrap DSGE New Keynesian New Classical indirect inference Wald statistic likelihood ratio DSGE-VAR weight |
| JEL: | | C12 C32 C52 E1 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Cardiff Economics Working Papers
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