SMU SOE Lee Kong Chian Seminar in Econometrics (May 9, 2022, 9.00am-10.30am): Specification Testing of DSGE Models Allowing for Indeterminacy and Weak Identification

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ABSTRACT We propose methods for testing the specification of linearized DSGE models allowing for multiple equilibria and weak identification. We build the framework from a frequency-domain perspective based on a new test statistic, enabling the separate evaluation of a model's static properties, dynamic properties, and properties over a chosen frequency band, such as the business cycle frequencies. The results are indicative of which variables and frequencies contribute to misspecification. We show that the test has a likelihood ratio interpretation and is consistent. In an application, the methods reject a typical small-scale DSGE model, revealing specification problems in the inflation dynamics and comovements between variables over business cycle frequencies. Click here to view the slides. Click here to view the CV.		This seminar will be held virtually via Zoom. A confirmation email with the Zoom details will be sent to the registered email by 6 May 2022.
		PRESENTER Qu Zhongjun Boston University
		RESEARCH FIELDS Time Series Econometrics Quantitative Macroeconomics Empirical Finance
		DATE: 9 May 2022 (Monday)
		TIME: 9.00am - 10.30am