Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/65790
Authors: 
Vo Phuong Mai Le
Meenagh, David
Minford, Patrick
Wickens, Michael
Year of Publication: 
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

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