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Learning in an estimated medium-scale DSGE model
- 1.0334167 - NHU-C 2010 RIV CZ eng J - Journal Article
Slobodyan, Sergey - Wouters, R.
Learning in an estimated medium-scale DSGE model.
CERGE-EI Working Paper Series. -, č. 396 (2009), s. 1-65. ISSN 1211-3298
R&D Projects: GA MŠMT LC542
Institutional research plan: CEZ:MSM0021620846
Keywords : constant gain adaptive learning * medium–scale DSGE model * DSGE-VAR
Subject RIV: AH - Economics
http://www.cerge-ei.cz/pdf/wp/Wp396.pdf
In this paper we evaluate the empirical relevance of learning by private agents in an estimated medium–scale DSGE model. We replace the standard rational expectation assumption in the Smets and Wouters (2007) model by a constant gain learning mechanism. If agents know the correct structure of the model and only learn about the parameters, both expectation mechanisms result in a similar fit, and only the transition dynamics that are generated by specific initial beliefs are responsible for the differences between the two approaches. If, in addition, agents use only a reduced information set in forming the perceived law of motion, the implied model dynamics change and for some initial beliefs the marginal likelihood of the model is further improved.
Permanent Link: http://hdl.handle.net/11104/0178978
File Download Size Commentary Version Access Wp396.pdf 0 1.9 MB Publisher’s postprint open-access
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