Identifying the sources of model misspecification

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  • dc.contributor.author Inoue, Atsushica
  • dc.contributor.author Kuo, Chun-Hungca
  • dc.contributor.author Rossi, Barbara, 1971-ca
  • dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
  • dc.date.accessioned 2017-07-26T10:51:10Z
  • dc.date.available 2017-07-26T10:51:10Z
  • dc.date.issued 2015-02-01
  • dc.date.modified 2017-07-23T02:16:57Z
  • dc.description.abstract In this paper we propose an empirical method for detecting and identifying misspecification in structural economic models. Our approach formalizes the common practice of adding "shocks" in the model, and identifies potential misspecification via forecast error variance decomposition and marginal likelihood analyses. The simulation results based on a small-scale DSGE model demonstrate that our method can correctly identify the source of misspecification. Our empirical results show that state-of-the-art medium-scale New Keynesian DSGE models remain misspecified, pointing to asset and labor markets as the sources of the misspecification.
  • dc.format.mimetype application/pdfca
  • dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1479
  • dc.identifier.citation
  • dc.identifier.uri http://hdl.handle.net/10230/23390
  • dc.language.iso eng
  • dc.relation.ispartofseries Economics and Business Working Papers Series; 1479
  • dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
  • dc.rights.accessRights info:eu-repo/semantics/openAccess
  • dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
  • dc.subject.keyword dsge models
  • dc.subject.keyword marginal likelihood
  • dc.subject.keyword misspecification.
  • dc.subject.keyword Macroeconomics and International Economics
  • dc.subject.keyword Statistics, Econometrics and Quantitative Methods
  • dc.title Identifying the sources of model misspecificationca
  • dc.title.alternative
  • dc.type info:eu-repo/semantics/workingPaper