{"title":"Using arbitrary precision arithmetic to sharpen identification analysis for DSGE models","authors":"Zhongjun Qu, Denis Tkachenko","doi":"10.1002/jae.2965","DOIUrl":null,"url":null,"abstract":"<p>We introduce arbitrary precision arithmetic to resolve practical difficulties arising in the identification analysis of dynamic stochastic general equilibrium (DSGE) models. A three-step procedure is proposed to address local and global identification and the empirical distance between models. The method is applied to monetary and fiscal policy interaction models, revealing exact observational equivalence in a small-scale model between an indeterminate passive monetary and fiscal policy regime and determinate regimes, and near observational equivalence in a medium-scale model. Additionally, the method yields new insights for a model with news shocks, demonstrating that wage markup shocks can be replaced by unanticipated moving average shocks, resulting in near observational equivalence.</p>","PeriodicalId":48363,"journal":{"name":"Journal of Applied Econometrics","volume":null,"pages":null},"PeriodicalIF":2.3000,"publicationDate":"2023-02-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://onlinelibrary.wiley.com/doi/epdf/10.1002/jae.2965","citationCount":"2","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Applied Econometrics","FirstCategoryId":"96","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1002/jae.2965","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 2
Abstract
We introduce arbitrary precision arithmetic to resolve practical difficulties arising in the identification analysis of dynamic stochastic general equilibrium (DSGE) models. A three-step procedure is proposed to address local and global identification and the empirical distance between models. The method is applied to monetary and fiscal policy interaction models, revealing exact observational equivalence in a small-scale model between an indeterminate passive monetary and fiscal policy regime and determinate regimes, and near observational equivalence in a medium-scale model. Additionally, the method yields new insights for a model with news shocks, demonstrating that wage markup shocks can be replaced by unanticipated moving average shocks, resulting in near observational equivalence.
期刊介绍:
The Journal of Applied Econometrics is an international journal published bi-monthly, plus 1 additional issue (total 7 issues). It aims to publish articles of high quality dealing with the application of existing as well as new econometric techniques to a wide variety of problems in economics and related subjects, covering topics in measurement, estimation, testing, forecasting, and policy analysis. The emphasis is on the careful and rigorous application of econometric techniques and the appropriate interpretation of the results. The economic content of the articles is stressed. A special feature of the Journal is its emphasis on the replicability of results by other researchers. To achieve this aim, authors are expected to make available a complete set of the data used as well as any specialised computer programs employed through a readily accessible medium, preferably in a machine-readable form. The use of microcomputers in applied research and transferability of data is emphasised. The Journal also features occasional sections of short papers re-evaluating previously published papers. The intention of the Journal of Applied Econometrics is to provide an outlet for innovative, quantitative research in economics which cuts across areas of specialisation, involves transferable techniques, and is easily replicable by other researchers. Contributions that introduce statistical methods that are applicable to a variety of economic problems are actively encouraged. The Journal also aims to publish review and survey articles that make recent developments in the field of theoretical and applied econometrics more readily accessible to applied economists in general.