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The Pruned State-Space System for Non-Linear DSGE Models: Theory and Empirical Applications

This paper studies the pruned state-space system for higher-order approximations to the solutions of DSGE models. For second- and third-order approximations, we derive the statistical properties of this system and provide closed-form expressions for ?first and second unconditional moments and impulse response functions. Thus, our analysis introduces GMM estimation for DSGE models approximated up to third-order and provides the foundation for indirect inference and SMM when simulation is required. We illustrate the usefulness of our approach by estimating a New Keynesian model with habits and Epstein-Zin preferences by GMM when using ?rst and second unconditional moments of macroeconomic and ?nancial data and by SMM when using additional third and fourth unconditional moments and non-Gaussian innovations.
Year of publication:
2013-11-04
Authors: Andreasen, Martin M. ; Fernández-Villaverde, Jesús ; Rubio-Ramírez, Juan F.
Institutions: School of Economics and Management, University of Aarhus
Extent:
application/pdf
Series:
Type of publication: Book / Working Paper
Notes:
6 pages long
Classification: C15 - Statistical Simulation Methods; Monte Carlo Methods ; C53 - Forecasting and Other Model Applications ; E30 - Prices, Business Fluctuations, and Cycles. General
Source:
Persistent link: https://ebvufind01.dmz1.zbw.eu/10010851288
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