How Structural Are Structural Parameters? / Jesús Fernández-Villaverde, Juan F. Rubio-Ramírez.

Format:

Book

Author/Creator:

Fernández-Villaverde, Jesús.

Contributor:

National Bureau of Economic Research.

Rubio-Ramírez, Juan F.

Series:

Working Paper Series (National Bureau of Economic Research) no. w13166.

NBER working paper series no. w13166

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2007.

Summary:

This paper studies how stable over time are the so-called "structural parameters" of dynamic stochastic general equilibrium (DSGE) models. To answer this question, we estimate a medium-scale DSGE model with real and nominal rigidities using U.S. data. In our model, we allow for parameter drifting and rational expectations of the agents with respect to this drift. We document that there is strong evidence that parameters change within our sample. We illustrate variations in the parameters describing the monetary policy reaction function and in the parameters characterizing the pricing behavior of firms and households. Moreover, we show how the movements in the pricing parameters are correlated with inflation. Thus, our results cast doubts on the empirical relevance of Calvo models.

Notes:

Print version record

June 2007.