Data Cloning Estimation and Identification of a Medium-Scale DSGE Model

Author(s)

Chaim, Pedro ; Laurini, Marcio Poletti

• Document type: Journal article
• Source: STATS; v. 6, n. 1, p. 13-pg., 2023-03-01.

Abstract

We apply the data cloning method to estimate a medium-scale dynamic stochastic general equilibrium model. The data cloning algorithm is a numerical method that employs replicas of the original sample to approximate the maximum likelihood estimator as the limit of Bayesian simulation-based estimators. We also analyze the identification properties of the model. We measure the individual identification strength of each parameter by observing the posterior volatility of data cloning estimates and access the identification problem globally through the maximum eigenvalue of the posterior data cloning covariance matrix. Our results corroborate existing evidence suggesting that the DSGE model of Smeets and Wouters is only poorly identified. The model displays weak global identification properties, and many of its parameters seem locally ill-identified. (AU)

• FAPESP's process: 18/04654-9 - Time series, wavelets and high dimensional data
• Grantee: Pedro Alberto Morettin
• Support Opportunities: Research Projects - Thematic Grants