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Comparing different data descriptors in Indirect Inference tests on DSGE models

Minford, Anthony, Wickens, Michael and Xu, Yongdeng 2016. Comparing different data descriptors in Indirect Inference tests on DSGE models. Economics Letters 145 , pp. 157-161. 10.1016/j.econlet.2016.06.016

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Indirect inference testing can be carried out with a variety of auxiliary models. Asymptotically these different models make no difference. However, in small samples power can differ. We explore small sample power with three different auxiliary models: a VAR, average Impulse Response Functions and Moments. The latter corresponds to the Simulated Moments Method. We find that in a small macro model there is no difference in power. But in a large complex macro model the power with Moments rises more slowly with increasing misspecification than with the other two which remain similar.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HF Commerce
Uncontrolled Keywords: Indirect Inference; DGSE model; Auxiliary models; Simulated Moments Method
Publisher: Elsevier
ISSN: 0165-1765
Date of First Compliant Deposit: 23 November 2016
Date of Acceptance: 12 June 2016
Last Modified: 11 Mar 2020 17:58

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