DP9411 A Monte Carlo procedure for checking identification in DSGE models

Author(s): Vo Phuong Mai Le, Patrick Minford, Michael R. Wickens
Publication Date: March 2013
Keyword(s): DSGE Model, Indirect Inference, Monte Carlo
JEL(s): C13, C51, C52, E32
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=9411

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.