Forming priors for DSGE models (and how it affects the assessment of nominal rigidities)

We discuss prior elicitation for the parameters of dynamic stochastic general equilibrium (DSGE) models, and provide a method for constructing prior distributions for a subset of these parameters from beliefs about steady-state relationships and second moments of the endogenous variables. The empiri...

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Veröffentlicht in:	Journal of monetary economics 2008-10, Vol.55 (7), p.1191-1208
Hauptverfasser:	Del Negro, Marco, Schorfheide, Frank
Format:	Artikel
Sprache:	eng
Schlagworte:	Bayesian analysis Bayesian analysis DSGE models Model comparisons Prior elicitation Nominal rigidities Bayesian method Comparative analysis DSGE models Economic models General economic equilibrium Keynesian theory Model comparisons Model testing Neokeynesianism Nominal rigidities Prices Prior elicitation Stochastic models Studies Wage rigidity
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Zusammenfassung:	We discuss prior elicitation for the parameters of dynamic stochastic general equilibrium (DSGE) models, and provide a method for constructing prior distributions for a subset of these parameters from beliefs about steady-state relationships and second moments of the endogenous variables. The empirical application documents how the specification of the prior distribution affects our assessment of the relative importance of price and wage rigidities in a New Keynesian DSGE model.
ISSN:	0304-3932 1873-1295
DOI:	10.1016/j.jmoneco.2008.09.006