EVIDENCE ON FEATURES OF A DSGE BUSINESS CYCLE MODEL FROM BAYESIAN MODEL AVERAGING* |
| |
| Authors: | Rodney W. Strachan Herman K. Van Dijk |
| |
| Affiliation: | 1. The Australian National University, Australia;2. Erasmus University Rotterdam and VU University, Amsterdam, The Netherlands |
| |
| Abstract: | The empirical support for features of a Dynamic Stochastic General Equilibrium model with two technology shocks is evaluated using Bayesian model averaging over vector autoregressions. The model features include equilibria, restrictions on long‐run responses, a structural break of unknown date, and a range of lags and deterministic processes. We find support for a number of features implied by the economic model, and the evidence suggests a break in the entire model structure around 1984, after which technology shocks appear to account for all stochastic trends. Business cycle volatility seems more due to investment‐specific technology shocks than neutral technology shocks. |
| |
| Keywords: | |
|
|
