A Proposal of Flexible Trend Specification in DSGE Models

D 2012

A Proposal of Flexible Trend Specification in DSGE Models

SLANICAY, Martin

Basic information

Original name

A Proposal of Flexible Trend Specification in DSGE Models

Authors

SLANICAY, Martin (203 Czech Republic, guarantor, belonging to the institution)

Edition

1. vyd. Karviná, Proceedings of 30th International Conference Mathematical Methods in Economics, p. 811-816, 6 pp. 2012

Publisher

Silesian University, School of Business

Other information

Language

English

Type of outcome

Proceedings paper

Field of Study

50200 5.2 Economics and Business

Country of publisher

Czech Republic

Confidentiality degree

is not subject to a state or trade secret

Publication form

printed version "print"

References:

URL

RIV identification code

RIV/00216224:14560/12:00060948

Organization unit

Faculty of Economics and Administration

ISBN

978-80-7248-779-0

UT WoS

000316715900139

Keywords in English

DSGE model; trend specification; Bayesian estimation

Abstract

In the original language

In this paper I propose flexible trend specification for estimating DSGE models on the log differences. I demonstrate this flexible trend specification on a New Keynesian DSGE model of two economies, which I consequently estimate on the data of the Czech economy and Euro Area 12, using Bayesian techniques. The advantage of the proposed trend specification is that the trend component and the cyclical component are modeled jointly in one model and the model itself decides which part of the data belongs to the trend component and which part belongs to the cyclical component. The proposed trend specification is flexible in the sense that smoothness of the trend can be easily modified by different calibration of the trend parameters. Results suggest that this method is able to find very reasonable trend in the data. Moreover, according to the Bayes factor the proposed specification decisively outperforms the original specification of the model estimated on the demeaned log differences with the same number of shocks.

Links

1M0524, research and development project

Name: Centrum výzkumu konkurenční schopnosti české ekonomiky

Investor: Ministry of Education, Youth and Sports of the CR, Research Centre for the Competitiveness of the Czech Economy

Cite

SLANICAY, Martin. A Proposal of Flexible Trend Specification in DSGE Models. In RAMÍK, J and STAVÁREK, D. (eds.). Proceedings of 30th International Conference Mathematical Methods in Economics. 1. vyd. Karviná: Silesian University, School of Business, 2012, p. 811-816. ISBN 978-80-7248-779-0.

@inproceedings{992715,
   author = {Slanicay, Martin},
   address = {Karviná},
   booktitle = {Proceedings of 30th International Conference Mathematical Methods in Economics},
   edition = {1. vyd.},
   editor = {RAMÍK, J and STAVÁREK, D. (eds.)},
   keywords = {DSGE model; trend specification; Bayesian estimation},
   howpublished = {tištěná verze "print"},
   language = {eng},
   location = {Karviná},
   isbn = {978-80-7248-779-0},
   pages = {811-816},
   publisher = {Silesian University, School of Business},
   title = {A Proposal of Flexible Trend Specification in DSGE Models},
   url = {http://mme2012.opf.slu.cz/proceedings/pdf/139_Slanicay.pdf},
   year = {2012}
}

TY  - CONF
ID  - 992715
AU  - Slanicay, Martin
PY  - 2012
TI  - A Proposal of Flexible Trend Specification in DSGE Models
PB  - Silesian University, School of Business
CY  - Karviná
SN  - 9788072487790
KW  - DSGE model
KW  - trend specification
KW  - Bayesian estimation
UR  - http://mme2012.opf.slu.cz/proceedings/pdf/139_Slanicay.pdf
N2  - In this paper I propose flexible trend specification for estimating DSGE models on the log differences. I demonstrate this flexible trend specification on a New Keynesian DSGE model of two economies, which I consequently estimate on the data of the Czech economy and Euro Area 12, using Bayesian techniques. The advantage of the proposed trend specification is that the trend component and the cyclical component are modeled jointly in one model and the model itself decides which part of the data belongs to the trend component and which part belongs to the cyclical component. The proposed trend specification is flexible in the sense that smoothness of the trend can be easily modified by different calibration of the trend parameters. Results suggest that this method is able to find very reasonable trend in the data. Moreover, according to the Bayes factor the proposed specification decisively outperforms the original specification of the model estimated on the demeaned log differences with the same number of shocks.
ER  -

SLANICAY, Martin. A Proposal of Flexible Trend Specification in DSGE Models. In RAMÍK, J and STAVÁREK, D. (eds.). \textit{Proceedings of 30th International Conference Mathematical Methods in Economics}. 1. vyd. Karviná: Silesian University, School of Business, 2012, p.~811-816. ISBN~978-80-7248-779-0.

Přehled o publikaci