Evidence on Features of a DSGE Business Cycle Model from Bayesian Model Averaging
The empirical support for features of a Dynamic Stochastic General Equilibrium model with two technology shocks is valuated using Bayesian model averaging over vector autoregressions. The model features include equilibria, restrictions on long-run responses, a structural break of unknown date and a range of lags and deterministic processes. We find support for a number of features implied by the economic model and the evidence suggests a break in the entire model structure around 1984 after which technology shocks appear to account for all stochastic trends. Business cycle volatility seems more due to investment specific technology shocks than neutral technology shocks.
|Dynamic stochastic general equilibrium model, Model averaging, Posterior probability, Stochastic trend, Vector autoregressive model, cointegration, impulse response|
|Bayesian Analysis (jel C11), Time-Series Models; Dynamic Quantile Regressions (jel C32), Model Evaluation and Testing (jel C52)|
|Tinbergen Institute Discussion Paper Series|
|Discussion paper / Tinbergen Institute|
Strachan, R.W, & van Dijk, H.K. (2012). Evidence on Features of a DSGE Business Cycle Model from Bayesian Model Averaging (No. TI 12-025/4). Discussion paper / Tinbergen Institute (pp. 1–50). Tinbergen Institute. Retrieved from http://hdl.handle.net/1765/32101