CHOOSING THE VARIABLES TO ESTIMATE SINGULAR DSGE MODELS |
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| Authors: | Fabio Canova Filippo Ferroni Christian Matthes |
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| Affiliation: | 1. EUI, Florence, Italy;2. CEPR, CEPR, London, UK;3. Banque de France, Paris, France;4. University of Surrey, Guildford, UK;5. Federal Reserve Bank of Richmond, VA, USA |
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| Abstract: | We propose two methods to choose the variables to be used in the estimation of the structural parameters of a singular DSGE model. The first selects the vector of observables that optimizes parameter identification; the second selects the vector that minimizes the informational discrepancy between the singular and non‐singular model. An application to a standard model is discussed and the estimation properties of different setups compared. Practical suggestions for applied researchers are provided. Copyright © 2014 John Wiley & Sons, Ltd. |
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