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http://hdl.handle.net/10419/65840
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| Title: | | Testing a DSGE model of the EU using indirect inference  |
| Authors: | | Meenagh, David Minford, Patrick Wickens, Michael |
| Issue Date: | | 2008 |
| Series/Report no.: | | Cardiff Economics Working Papers E2008/11 |
| Abstract: | | We use the method of indirect inference, using the bootstrap, to test the Smets and Wouters model of the EU against a VAR auxiliary equation describing their data. We find that their model generates excessive variance compared with the data. But their model fits the dynamic facts quite well if the errors have the properties assumed by SW but scaled down. We compare a New Classical version of the model which also performs reasonably if error properties are chosen using New Classical priors (notably excluding shocks to preferences). Both versions have (different) difficulties fitting the data if the actual error properties are used. A model combining rigid and flexible-wage/price sectors, with a weight of around 5% on the rigid sector, does best in fitting the data. |
| Subjects: | | bootstrap DSGE Model VAR model Model of EU indirect inference Wald statistic |
| JEL: | | C12 C32 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Cardiff Economics Working Papers
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