DP9381 Choosing the variables to estimate singular DSGE models

Author(s): Fabio Canova, Filippo Ferroni, Christian Matthes
Publication Date: March 2013
Keyword(s): ABCD representation, Density ratio, DSGE models., Identification
JEL(s): C10, E27, E32
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=9381

We propose two methods to choose the variables to be used in the estimation of the structural parameters of a singular DSGE model. The first selects the vector of observables that optimizes parameter identification; the second the vector that minimizes the informational discrepancy between the singular and non-singular model. An application to a standard model is discussed and the estimation properties of different setups compared. Practical suggestions for applied researchers are provided.