A shock of interest can be recovered, either exactly or with a good approximation, by means of standard VAR techniques even when the structural MA representation is noninvertible or non-fundamental. We propose a measure of how informative a VAR model is for a specific shock of interest. We show how to use such a measure for the validation of shocks’ transmission mechanism of DSGE models through VARs. In an application, we validate a theory of news shocks. The theory does remarkably well for all variables, but understates the long-run effects of technology news on TFP.
Forni, M., L., Gambetti e L., Sala. "VAR Information and the Empirical Validation of DSGE Models" Working paper, RECENT WORKING PAPER SERIES, Dipartimento di Economia Marco Biagi – Università di Modena e Reggio Emilia, 2016.
VAR Information and the Empirical Validation of DSGE Models
Forni, M.;Gambetti, L.;
2016
Abstract
A shock of interest can be recovered, either exactly or with a good approximation, by means of standard VAR techniques even when the structural MA representation is noninvertible or non-fundamental. We propose a measure of how informative a VAR model is for a specific shock of interest. We show how to use such a measure for the validation of shocks’ transmission mechanism of DSGE models through VARs. In an application, we validate a theory of news shocks. The theory does remarkably well for all variables, but understates the long-run effects of technology news on TFP.File | Dimensione | Formato | |
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