Economics Seminar: Bridging Cyclical DSGE Models and the Raw Data

When?

Wednesday 12 October 2011, 15.00 to 16.00

Where?

04AD00

Open to:

Public, Staff, Students

Speaker:

Fabio Canova (Pompeu fabra University)

Fabio Canova (Pompeu fabra University) 

Abstract

I propose a method to estimate cyclical DSGE models using the raw data. The approach links the observables to the model counterparts via a flexible specification which does not require that the cyclical component is solely located at business cycle frequencies and allows the noncyclical component to take various time series patterns. I show that applying standard data transformation induces distortions in structural estimates and policy conclusions and explain the reasons for their emergence. The proposed approach recovers the features of the cyclical component in selected experimental designs.