NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Forming Priors for DSGE Models (and How it Affects the Assessment of Nominal Rigidities)

Marco Del Negro, Frank Schorfheide

NBER Working Paper No. 13741
Issued in January 2008
NBER Program(s):   EFG   ME

The paper discusses prior elicitation for the parameters of dynamic stochastic general equilibrium (DSGE) models, and provides a method for constructing prior distributions for a subset of these parameters from beliefs about the moments of the endogenous variables. The empirical application studies the role of price and wage rigidities in a New Keynesian DSGE model and finds that standard macro time series cannot discriminate among theories that differ in the quantitative importance of nominal frictions.

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Document Object Identifier (DOI): 10.3386/w13741

Published: Del Negro, Marco & Schorfheide, Frank, 2008. "Forming priors for DSGE models (and how it affects the assessment of nominal rigidities)," Journal of Monetary Economics, Elsevier, vol. 55(7), pages 1191-1208, October.

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