A Monte Carlo Procedure for Checking Identification in DSGE Models

21 Pages Posted: 3 Apr 2013

See all articles by Vo Phuong Mai Le

Vo Phuong Mai Le

Cardiff University - Cardiff Business School

Patrick Minford

Cardiff University Business School; Centre for Economic Policy Research (CEPR)

Michael Wickens

University of York; Cardiff Business School; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: March 2013

Abstract

We propose a numerical method, based on indirect inference, for checking the identification of a DSGE model. Monte Carlo samples are generated from the model's true structural parameters and a VAR approximation to the reduced form estimated for each sample. We then search for a different set of structural parameters that could potentially also generate these VAR parameters. If we can find such a set, the model is not identified.

Keywords: DSGE Model, Indirect Inference, Monte Carlo

JEL Classification: C13, C51, C52, E32

Suggested Citation

Le, Vo Phuong Mai and Minford, Patrick and Wickens, Michael, A Monte Carlo Procedure for Checking Identification in DSGE Models (March 2013). CEPR Discussion Paper No. DP9411. Available at SSRN: https://ssrn.com/abstract=2244091

Vo Phuong Mai Le (Contact Author)

Cardiff University - Cardiff Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom

Patrick Minford

Cardiff University Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom
+44 29 2087 5728 (Phone)
+44 29 2087 4419 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Michael Wickens

University of York ( email )

Heslington
York, YO10 5DD
United Kingdom
+44 1904 433 764 (Phone)
+44 1904 433 575 (Fax)

Cardiff Business School ( email )

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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