Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2018-03-30
Number: 18-030/III
Author-Name: Giovanni Angelini
Author-Workplace-Name: University of Bologna, Italy
Author-Name: Paolo Gorgi
Author-Workplace-Name: VU Amsterdam, The Netherlands
Title: DSGE Models with Observation-Driven Time-Varying parameters
Abstract: This paper proposes a novel approach to introduce time-variation in structural parameters of DSGE models. Structural parameters are allowed to evolve over time via an observation-driven updating equation. The estimation of the resulting DSGE model can be easily performed by maximum likelihood without the need of time-consuming simulation-based methods. An application to a DSGE model with time varying volatility for structural shocks is presented. The results indicate a significant improvement in forecasting performance.
Classification-JEL: C32, C5
Keywords: DSGE models, score-driven models, time-varying parameters
File-Url: https://papers.tinbergen.nl/18030.pdf
File-Format: application/pdf
File-Size: 549919 bytes
Handle: RePEc:tin:wpaper:20180030