NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Estimation of DSGE Models When the Data are Persistent

Yuriy Gorodnichenko, Serena Ng

NBER Working Paper No. 15187
Issued in July 2009
NBER Program(s):   EFG   IFM   ME   TWP

Dynamic Stochastic General Equilibrium (DSGE) models are often solved and estimated under specific assumptions as to whether the exogenous variables are difference or trend stationary. However, even mild departures of the data generating process from these assumptions can severely bias the estimates of the model parameters. This paper proposes new estimators that do not require researchers to take a stand on whether shocks have permanent or transitory effects. These procedures have two key features. First, the same filter is applied to both the data and the model variables. Second, the filtered variables are stationary when evaluated at the true parameter vector. The estimators are approximately normally distributed not only when the shocks are mildly persistent, but also when they have near or exact unit roots. Simulations show that these robust estimators perform well especially when the shocks are highly persistent yet stationary. In such cases, linear detrending and first differencing are shown to yield biased or imprecise estimates.

download in pdf format
   (619 K)

email paper

This paper is available as PDF (619 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w15187

Published: Gorodnichenko, Yuriy & Ng, Serena, 2010. "Estimation of DSGE models when the data are persistent," Journal of Monetary Economics, Elsevier, vol. 57(3), pages 325-340, April. citation courtesy of

Users who downloaded this paper also downloaded these:
Christiano, Trabandt, and Walentin w16074 DSGE Models for Monetary Policy Analysis
Fernández-Villaverde w14677 The Econometrics of DSGE Models
Caldara, Fernández-Villaverde, Rubio-Ramírez, and Wen w15026 Computing DSGE Models with Recursive Preferences
Schorfheide w16781 Estimation and Evaluation of DSGE Models: Progress and Challenges
Schorfheide, Sill, and Kryshko w14872 DSGE Model-Based Forecasting of Non-modelled Variables
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us