DSGE Models with Observation-Driven Time-Varying Parameters

This paper proposes a novel approach to introduce time-variation in structural parameters of DSGE models. Structural parameters are allowed to evolve over time via an observation-driven updating equation. The estimation of the resulting DSGE model can be easily performed by maximum likelihood without the need of time-consuming simulation-based methods. An application to a DSGE model with time varying volatility for structural shocks is presented. The results indicate a significant improvement in forecasting performance

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Year of publication:	2018
Authors:	Angelini, Giovanni
Other Persons:	Gorgi, Paolo (contributor)
Publisher:	[2018]: [S.l.] : SSRN
Subject:	Dynamisches Gleichgewicht \| Dynamic equilibrium \| DSGE-Modell \| DSGE model \| VAR-Modell \| VAR model \| Theorie \| Theory \| Zustandsraummodell \| State space model \| Schock \| Shock \| Monte-Carlo-Simulation \| Monte Carlo simulation

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