Forming Priors for DSGE Models (and How it Affects the Assessment of Nominal Rigidities)

Del Negro, Marco; Schorfheide, Frank

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Forming Priors for DSGE Models (and How it Affects the Assessment of Nominal Rigidities)

NBER Working Paper No. w13741

39 Pages Posted: 24 Jan 2008 Last revised: 20 Jul 2022

See all articles by Marco Del Negro

University of Pennsylvania - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER); University of Pennsylvania - The Penn Institute for Economic Research (PIER)

There are 3 versions of this paper

Date Written: January 2008

Abstract

The paper discusses prior elicitation for the parameters of dynamic stochastic general equilibrium (DSGE) models, and provides a method for constructing prior distributions for a subset of these parameters from beliefs about the moments of the endogenous variables. The empirical application studies the role of price and wage rigidities in a New Keynesian DSGE model and finds that standard macro time series cannot discriminate among theories that differ in the quantitative importance of nominal frictions.

Suggested Citation: Suggested Citation

Del Negro, Marco and Schorfheide, Frank, Forming Priors for DSGE Models (and How it Affects the Assessment of Nominal Rigidities) (January 2008). NBER Working Paper No. w13741, Available at SSRN: https://ssrn.com/abstract=1086992