Information Criteria for Impulse Response Function Matching Estimation of DSGE Models

FRB of Atlanta Working Paper No. 2007-10a

41 Pages Posted: 25 May 2007 Last revised: 6 Jul 2014

See all articles by Alastair R. Hall

Alastair R. Hall

North Carolina State University - Department of Economics; University of Manchester

Atsushi Inoue

Southern Methodist University

James M. Nason

North Carolina State University - Department of Economics

Barbara Rossi

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI); Barcelona Graduate School of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: October 2008

Abstract

We propose a new information criterion for impulse response function matching estimators (IRFMEs) of the structural parameters of dynamic stochastic general equilibrium (DSGE) macroeconomic models. An advantage of our procedure is that it allows researchers to select the impulse responses that are most informative about DSGE model parameters and ignore the rest. The idea of tossing out superfluous impulse responses motivates our Redundant Impulse Response Selection Criterion (RIRSC). The RIRSC is general enough to apply to impulse responses estimated by VARs, local projections, and simulation methods. We show that our criterion significantly affects estimates and inference about key parameters of two well-known New Keynesian DSGE models. Monte Carlo evidence indicates that the RIRSC yields gains in terms of finite sample bias as well as offering tests statistics whose behavior is better approximated by first order asymptotic theory. Thus, RIRSC improves on existing methods used to implement IRFMEs.

Keywords: impulse response function, matching estimator, redundant selection criterion

JEL Classification: C32, E47, C52, C53

Suggested Citation

Hall, Alastair R. and Inoue, Atsushi and Nason, James M. and Rossi, Barbara, Information Criteria for Impulse Response Function Matching Estimation of DSGE Models (October 2008). FRB of Atlanta Working Paper No. 2007-10a, Available at SSRN: https://ssrn.com/abstract=988768 or http://dx.doi.org/10.2139/ssrn.988768

Alastair R. Hall

North Carolina State University - Department of Economics ( email )

Raleigh, NC 27695-8110
United States

University of Manchester ( email )

Oxford Road
Manchester, N/A M13 9PL
United Kingdom

Atsushi Inoue

Southern Methodist University ( email )

Dallas, TX 75275
United States

James M. Nason (Contact Author)

North Carolina State University - Department of Economics ( email )

Campus Box 8110
NC State University
Raleigh, NC 27695-8110
United States
(919) 513-2884 (Phone)
(919) 515-5613 (Fax)

Barbara Rossi

Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI) ( email )

Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain

Barcelona Graduate School of Economics ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

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