Impulse Response Identification in DSGE Models

33 Pages Posted: 9 Jan 2011

See all articles by Martin Fukac

Martin Fukac

Federal Reserve Bank of Kansas City

Date Written: February 16, 2010

Abstract

Dynamic stochastic general equilibrium (DSGE) models have become a widely used tool for policymakers. This paper modifies the global identification theory used for structural vectorautoregressions, and applies it to DSGE models. We use this theory to check whether a DSGE model structure allows for unique estimates of structural shocks and their dynamic effects. The potential cost of a lack of identification for policy oriented models along that specific dimension is huge, as the same model can generate a number of contrasting yet theoretically and empirically justifiable recommendations. The problem and methodology are illustrated using a simple New Keynesian business cycle model.

Keywords: Indentificaiton of DSGE models, impulse response, identification, minimal system realisation

JEL Classification: C30, C52

Suggested Citation

Fukac, Martin, Impulse Response Identification in DSGE Models (February 16, 2010). Available at SSRN: https://ssrn.com/abstract=1553933 or http://dx.doi.org/10.2139/ssrn.1553933

Martin Fukac (Contact Author)

Federal Reserve Bank of Kansas City ( email )

1 Memorial Dr.
Kansas City, MO 64198
United States

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