Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/144322
Authors: 
Smets, Frank
Wouters, Raf
Year of Publication: 
2007
Series/Report no.: 
Working Paper Research 109
Abstract: 
Using a Bayesian likelihood approach, we estimate a dynamic stochastic general equilibrium model for the US economy using seven macro-economic time series. The model incorporates many types of real and nominal frictions and seven types of structural shocks. We show that this model is able to compete with Bayesian Vector Autoregression models in out-of-sample prediction. We investigate the relative empirical importance of the various frictions. Finally, using the estimated model we address a number of key issues in business cycle analysis: What are the sources of business cycle fluctuations? Can the model explain the cross-correlation between output and inflation? What are the effects of productivity on hours worked? What are the sources of the “Great Moderation”?
Subjects: 
DSGE models
monetary policy
JEL: 
E4
E5
Document Type: 
Working Paper

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