Practical Tools for Policy Analysis in Dsge Models With Missing Shocks

Abstract

SUMMARYIn this paper we analyze the propagation of shocks originating in sectors that are not present in a baseline dynamic stochastic general equilibrium (DSGE) model. Specifically, we proxy the missing sector through a small set of factors that feed into the structural shocks of the DSGE model to create correlated disturbances. We estimate the factor structure by either matching impulse responses of the augmented DSGE model to those generated by an auxiliary model or by using Bayesian techniques. We apply this methodology to track the effects of oil shocks and housing demand shocks in models without energy or housing sectors. Copyright © 2014 John Wiley & Sons, Ltd.

Global Growth on Life Support? The Contributions of Fiscal and Monetary Policy Since the Global Financial Crisis

“…Using structural panel VARs in the spirit of Jarocinski (2010) we examine the joint role of scal and monetary policies in shaping global growth since the global nancial crisis in both advanced and emerging economies. As Caldara and Kamps (2008) note, vector autoregressive (VAR) models have become a key econometric tool to assess the eects of monetary and scal policy shocks. Our paper is therefore related to the wide literature on the identication of monetary and scal policy shocks, which are well summarized in Ramey (2016).…”

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