Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/85251
Authors: 
Kliem, Martin
Uhlig, Harald
Year of Publication: 
2013
Series/Report no.: 
Discussion Paper, Deutsche Bundesbank 37/2013
Abstract: 
This paper presents a novel Bayesian method for estimating dynamic stochastic general equilibrium (DSGE) models subject to a constrained posterior distribution of the implied Sharpe ratio. We apply our methodology to a DSGE model with habit formation in consumption and leisure, using an estimate of the Sharpe ratio to construct the constraint. We show that the constrained estimation produces a quantitative model with both reasonable asset-pricing as well as business-cycle implications.
Subjects: 
Bayesian estimation
stochastic steady-state
prior choice
Sharpe ratio
JEL: 
C11
E32
E44
G12
ISBN: 
978-3-86558-960-6
Document Type: 
Working Paper

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