DSGE Models with Student-<italic>t</italic> Errors

This paper deals with Dynamic Stochastic General Equilibrium (DSGE) models under a multivariate student-<italic>t</italic> distribution for the structural shocks. Based on the solution algorithm of Klein (2000) and the gamma-normal representation of the <italic>t</italic>-distribution, the TaRB-MH algorithm of Chib and Ramamurthy (2010) is used to estimate the model. A technique for estimating the marginal likelihood of the DSGE student-<italic>t</italic> model is also provided. The methodologies are illustrated first with simulated data and then with the DSGE model of Ireland (2004) where the results support the <italic>t</italic>-error model in relation to the Gaussian model.