American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Monetary Policy Analysis with Potentially Misspecified Models
American Economic Review
vol. 99,
no. 4, September 2009
(pp. 1415–50)
Abstract
Policy analysis with potentially misspecified dynamic stochastic general equilibrium (DSGE) models faces two challenges: estimation of parameters that are relevant for policy trade-offs, and treatment of the deviations from the cross-equation restrictions. Using post-1982 US data, we study the robustness of the policy prescriptions from a state-of-the-art DSGE model with respect to two approaches to model misspecification pursued in the recent literature: (i) adding shocks to the DSGE model and/or generalizing the processes followed by these shocks; and (ii) explicit modeling of deviations from cross-equation restrictions (DSGE-VAR). (JEL C51, E13, E43, E52, E58)Citation
Del Negro, Marco, and Frank Schorfheide. 2009. "Monetary Policy Analysis with Potentially Misspecified Models." American Economic Review, 99 (4): 1415–50. DOI: 10.1257/aer.99.4.1415Additional Materials
JEL Classification
- C51 Model Construction and Estimation
- E13 General Aggregative Models: Neoclassical
- E43 Determination of Interest Rates; Term Structure of Interest Rates
- E52 Monetary Policy
- E58 Central Banks and Their Policies