Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/230420 
Year of Publication: 
2018
Series/Report no.: 
Cardiff Economics Working Papers No. E2018/14
Publisher: 
Cardiff University, Cardiff Business School, Cardiff
Abstract: 
We review recent findings in the application of Indirect Inference to DSGE models. We show that researchers should tailor the power of their test to the model under investigation in order to achieve a balance between high power and model tractability; this will involve choosing only a limited number of variables on whose behaviour they should focus. Also recent work reveals that it makes little difference which these variables are or how their behaviour is measured whether via A VAR, IRFs or Moments. We also review identification issues and whether alternative evaluation methods such as forecasting or Likelihood ratio tests are potentially helpful.
Subjects: 
Pseudo-true inference
DSGE models
Indirect Inference
Wald tests
Likelihood Ratio tests
robustness
JEL: 
C12
C32
C52
E1
Document Type: 
Working Paper

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