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- Title
PRACTICAL TOOLS FOR POLICY ANALYSIS IN DSGE MODELS WITH MISSING SHOCKS.
- Authors
Caldara, Dario; Harrison, Richard; Lipińska, Anna
- Abstract
SUMMARY In this paper we analyze the propagation of shocks originating in sectors that are not present in a baseline dynamic stochastic general equilibrium (DSGE) model. Specifically, we proxy the missing sector through a small set of factors that feed into the structural shocks of the DSGE model to create correlated disturbances. We estimate the factor structure by either matching impulse responses of the augmented DSGE model to those generated by an auxiliary model or by using Bayesian techniques. We apply this methodology to track the effects of oil shocks and housing demand shocks in models without energy or housing sectors. Copyright © 2014 John Wiley & Sons, Ltd.
- Subjects
ECONOMIC shock; COMPUTABLE general equilibrium models; MATHEMATICAL models of monetary policy; ESTIMATION theory; FACTOR analysis; MATHEMATICAL models
- Publication
Journal of Applied Econometrics, 2014, Vol 29, Issue 7, p1145
- ISSN
0883-7252
- Publication type
Article
- DOI
10.1002/jae.2409