Inoue, AtsushiKuo, Chun-HungRossi, Barbara, 1971-2016-04-282016-04-282014-09http://hdl.handle.net/10230/26216In this paper we propose empirical methods for detecting and identifying misspecifications in DSGE models. We introduce wedges in a DSGE model and identify potential misspecification via forecast error variance decomposition (FEVD) and marginal likelihood analyses. Our 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 the medium-scale New Keynesian DSGE model that incorporates features in the recent empirical macro literature is still very much misspecified; our analysis highlights that the asset and labor markets may be the source of the misspecification.application/pdfengOriginal publication is available at CEPR at http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=10140info:eu-repo/semantics/workingPaperDSGE modelsEmpirical macroeconomics and model misspecificationinfo:eu-repo/semantics/openAccess