TY  - JOUR
AU  - Gorodnichenko,Yuriy
AU  - Ng,Serena
TI  - Estimation of DSGE Models When the Data are Persistent
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15187
PY  - 2009
Y2  - July 2009
UR  - http://www.nber.org/papers/w15187
L1  - http://www.nber.org/papers/w15187.pdf
N1  - Author contact info:
Yuriy Gorodnichenko
Department of Economics
508-1 Evans Hall #3880
University of California, Berkeley
Berkeley, CA 94720-3880
Tel: 510/643-0720
Fax: 510/642-6615
E-Mail: ygorodni@econ.berkeley.edu

Serena Ng
Department of Economics
Columbia University
440 W. 118 St.
International Affairs Building, MC 3308
New York
NY 10027
Tel: 212-854-5488
E-Mail: serena.ng@columbia.edu
AB  - 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.
ER  -