Testing for linear and Markov switching DSGE models

This paper addresses the issue related to testing for non-linearity in economic models using new principal component based multivariate non-linearity tests. Monte Carlo results suggest that the new multivariate tests have good size and power properties even in small samples usually available in practice. The empirical results indicate that the use of linear economic models is unsuitable for policy recommendations.

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Year of publication:	2013-12
Authors:	Vavra, Marian
Institutions:	Národná Banka Slovenska
Subject:	DSGE model \| Markov-switching \| Monte Carlo method \| principal components \| nonlinearity testing

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Extent:	application/pdf
Series:	Working and Discussion Papers. - ISSN 1337-5830.
Type of publication:	Book / Working Paper
Notes:	Number WP 3/2013 29 pages
Classification:	C12 - Hypothesis Testing ; C15 - Statistical Simulation Methods; Monte Carlo Methods ; C32 - Time-Series Models
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010734233