Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/183343
Authors: 
Iskrev, Nikolay
Year of Publication: 
2018
Series/Report no.: 
ECB Working Paper 2161
Abstract: 
Standard economic intuition suggests that asset prices are more sensitive to news than other economic aggregates. This has led many researchers to conclude that asset price data would be very useful for the estimation of business cycle models containing news shocks. This paper shows how to formally evaluate the information content of observed variables with respect to unobserved shocks in structural macroeconomic models. The proposed methodology is applied to two different real business cycle models with news shocks. The contribution of asset prices is found to be relatively small. The methodology is general and can be used to measure the informational importance of observables with respect to latent variables in DSGE models. Thus, it provides a framework for systematic treatment of such issues, which are usually discussed in an informal manner in the literature.
Subjects: 
DSGE models
News Shocks
Asset prices
Information
Identification
JEL: 
C32
C51
C52
E32
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-3266-0
Document Type: 
Working Paper

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