Table of Contents

Handbook of Research Methods and Applications in Empirical Macroeconomics

Handbook of Research Methods and Applications in Empirical Macroeconomics

Handbooks of Research Methods and Applications series

Edited by Nigar Hashimzade and Michael A. Thornton

This comprehensive Handbook presents the current state of art in the theory and methodology of macroeconomic data analysis. It is intended as a reference for graduate students and researchers interested in exploring new methodologies, but can also be employed as a graduate text. The Handbook concentrates on the most important issues, models and techniques for research in macroeconomics, and highlights the core methodologies and their empirical application in an accessible manner. Each chapter is largely self-contained, whilst the comprehensive introduction provides an overview of the key statistical concepts and methods. All of the chapters include the essential references for each topic and provide a sound guide for further reading.

Chapter 18: The science and art of DSGE modelling: I – construction and Bayesian estimation

Cristiano Cantore, Vasco J. Gabriel, Paul Levine, Joseph Pearlman and Bo Yang

Subjects: economics and finance, econometrics, research methods, research methods in economics

Extract

The past forty years or so have seen a remarkable transformation in macro-models used by central banks, policymakers and forecasting bodies. In this chapter and the next, we discuss how the different elements of modern macroeconomic models can be seamlessly integrated in a framework encompassing the different stages of model building, estimation and policy analysis. We describe the development of the building blocks of such models, showing that the main features of New Keynesian (NK) Dynamic Stochastic General Equilibrium (DSGE) models consist of a ‘Real Business Cycle’ (RBC) core, with an outer shell that includes nominal rigidities and other frictions. We then discuss how to take these models to the data, focusing on empirical implementations based on Bayesian system estimation methods. The road of macroeconomic modelling is full of twists and turns, but the different directions taken seem to have converged to what is still, to a large extent, the consensual synthesis. Indeed, the models that are now the mainstay for policy analysis and forecasting depart significantly from previous approaches in that they strike a balance between internal consistency, empirical adherence and adequacy for policy analysis.

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information