Details

Autor(en) / Beteiligte

• ANDREASEN, MARTIN M.
• FERNÁNDEZ-VILLAVERDE, JESÚS
• RUBIO-RAMÍREZ, JUAN F.

Titel

The Pruned State-Space System for Non-Linear DSGE Models: Theory and Empirical Applications

Ist Teil von

• The Review of economic studies, 2018-01, Vol.85 (1 (302)), p.1-49

Ort / Verlag

Oxford: Oxford University Press

Erscheinungsjahr

2018

Quelle

Business Source Ultimate

Beschreibungen/Notizen

• This article studies the pruned state-space system for higher-order perturbation approximations to dynamic stochastic general equilibrium (DSGE) models. We show the stability of the pruned approximation up to third order and provide closed-form expressions for first and second unconditional moments and impulse response functions. Our results introduce generalized method of moments (GMM) estimation and impulse-response matching for DSGE models approximated up to third order and provide a foundation for indirect inference and simulated method of moments (SMM). As an application, we consider a New Keynesian model with Epstein–Zin preferences and two novel feedback effects from long-term bonds to the real economy, allowing us to match the level and variability of the 10-year term premium in the U.S. with a low relative risk aversion of 5.