VAR Information and the Empirical Validation of DSGE Models
47 Pages Posted: 18 Apr 2016
Date Written: March 2016
Abstract
A shock of interest can be recovered, either exactly or with a good approximation, by means of standard VAR techniques even when the structural MA representation is non-invertible. We propose a measure of how informative a VAR model is for a specific shock of interest. We show how to use such a measure for the validation of shocks' transmission mechanism of DSGE models through VARs. In an application, we validate a theory of news shocks. The theory does fairly well for all variables, but understates the long-run effects of technology news on TFP.
Suggested Citation: Suggested Citation
Forni, Mario and Gambetti, Luca and Sala, Luca, VAR Information and the Empirical Validation of DSGE Models (March 2016). CEPR Discussion Paper No. DP11178, Available at SSRN: https://ssrn.com/abstract=2766473
Do you have negative results from your research you’d like to share?
Feedback
Feedback to SSRN
If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday.