Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70673
Authors: 
del Negro, Marco
Schorfheide, Frank
Year of Publication: 
2006
Series/Report no.: 
Working Paper, Federal Reserve Bank of Atlanta 2006-16
Abstract: 
In Bayesian analysis of dynamic stochastic general equilibrium (DSGE) models, prior distributions for some of the taste-and-technology parameters can be obtained from microeconometric or presample evidence, but it is difficult to elicit priors for the parameters that govern the law of motion of unobservable exogenous processes. Moreover, since it is challenging to formulate beliefs about the correlation of parameters, most researchers assume that all model parameters are independent of each other. We provide a simple method of constructing prior distributions for a subset of DSGE model parameters from beliefs about the moments of the endogenous variables. We use our approach to investigate the importance of nominal rigidities and show how the specification of prior distributions affects our assessment of the relative importance of different frictions.
Subjects: 
Bayesian analysis
DSGE models
model comparisons
prior elicitation
nominal rigidities
JEL: 
C32
E3
Document Type: 
Working Paper

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