Minimum Distance Estimation and Testing of DSGE Models from Structural VARs
Patrick Fève, Julien Matheron and Jean-Guillaume Sahuc (in French)
August 2009
Abstract
The aim of this paper is to complement the MDE--SVAR approach when the weighting matrix is not optimal. In empirical studies, this choice is motivated by stochastic singularity or collinearity problems associated with the covariance matrix of Impulse Response Functions. Consequently, the asymptotic distribution cannot be used to test the economic model's fit. To circumvent this difficulty, we propose a simple simulation method to construct critical values for the test statistics. An empirical application with US data illustrates the proposed method.
Keywords: MDE, SVAR, DSGE models.
JEL Classification: C15, C32, E32.
