Discussion paper

DP9411 A Monte Carlo procedure for checking identification in DSGE models

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.

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Citation

Minford, P, M Wickens and V Le (2013), ‘DP9411 A Monte Carlo procedure for checking identification in DSGE models‘, CEPR Discussion Paper No. 9411. CEPR Press, Paris & London. https://cepr.org/publications/dp9411