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 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.
Fabio Canova, Filippo Ferroni and Christian Matthes
Classification JEL : C10, E27, E32
Keywords : ABCD representation, Identification, Density ratio, DSGE models
Updated on: 06/12/2018 11:10