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Validating DSGE Models Through SVARs Under Imperfect Information
Oxford Bulletin of Economics and Statistics
Swansea University Author:
Bo Yang
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© 2025 The Author(s). Oxford Bulletin of Economics and Statistics published by Oxford University and John Wiley & Sons Ltd. This is an open access article under the terms of the Creative Commons Attribution License (CC BY).
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DOI (Published version): 10.1111/obes.12683
Abstract
We study the ability of SVARs to match impulse responses of a well-established DSGE model where the information of agents can be imperfect. We derive conditions for the solution of a linearized NK-DSGE model to be invertible given this information set. In the absence of invertibility, an approximate...
| Published in: | Oxford Bulletin of Economics and Statistics |
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| ISSN: | 0305-9049 1468-0084 |
| Published: |
Wiley
2025
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| Online Access: |
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| URI: | https://cronfa.swan.ac.uk/Record/cronfa69292 |
| Abstract: |
We study the ability of SVARs to match impulse responses of a well-established DSGE model where the information of agents can be imperfect. We derive conditions for the solution of a linearized NK-DSGE model to be invertible given this information set. In the absence of invertibility, an approximate measure is constructed. An SVAR is estimated using artificial data generated from the model and three forms of identification restrictions: zero, sign and bounds on the forecast error variance. We demonstrate that a VAR may not recover a subset of structural shocks when imperfect information causes the underlying model to be non-invertible. |
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| Keywords: |
imperfect information, impulse responses, invertibility-fundamentalness, SVAR-DSGE comparisons, validation of DSGE models |
| College: |
Faculty of Humanities and Social Sciences |
| Funders: |
Swansea University |