Approximating time varying structural models with time invariant structures
Title: Approximating time varying structural models with time invariant structures
Series/Number: CEPR Discussion Paper; 2015/DP10803
The paper studies how parameter variation affects the decision rules of a DSGE model and structural inference. We provide diagnostics to detect parameter variations and to ascertain whether they are exogenous or endogenous. Identification and inferential distortions when a constant parameter model is incorrectly assumed are examined. Likelihood and VAR-based estimates of the structural dynamics when parameter variations are neglected are compared. Time variations in the financial frictions of a Gertler and Karadi's (2010) model are studied.
Files in this item
There are no files associated with this item.