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by pseut
4787 days ago
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Do you know about the recent papers using DSGE models as priors for time series models? e.g. section 4.7.3 here: http://economics.sas.upenn.edu/~schorf/papers/bayesian_macro... (this is the closest I could find to a self-contained link, sorry). This stuff's not great, but I don't know what you mean by "useless for prediction". And, given a model, it's pretty trivial to figure out which shocks contributed when; this is the whole point of Impulse Response Functions, variance decompositions, etc. I've said this elsewhere on the page, but I'll repeat it here: this stuff isn't popular because it's logically airtight and compelling, but because it seemed to have done pretty well empirically. So the criticism that dsge models are unrealistic isn't very interesting; everyone knows that already, especially the people who use the stuff (for the most part. I'm sure there are some dsge truthers too). If anyone has an approach that works better empirically at addressing core macro questions, especially the newly important interplay between the real economy and credit markets, this would be a great time to put it out there. There are a lot of people paying attention. |
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