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Luca Gambetti, UAB Print
Thursday, 17 March 2016, 12:15 - 13:15

Luca Gambetti, UAB

Measuring VAR Information for Validating DSGE Models 

Abstract: A shock of interest can be recovered, either exactly or with a good approximation, by means of standard VAR techniques even when the structural MA representation is non-invertible or non-fundamental. We propose a measure of how informative a VAR model is for a specific shock of interest. We show how to use such a measure for the validation of shocks' transmission mechanism of DSGE models through VARs. In an application, we validate a theory of news shocks. The theory does remarkably well for all variables, but understates the long-run ffects of technology news on TFP. 


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