Quantitative Economics
Journal Of The Econometric Society
Edited by: Stéphane Bonhomme • Print ISSN: 1759-7323 • Online ISSN: 1759-7331
Edited by: Stéphane Bonhomme • Print ISSN: 1759-7323 • Online ISSN: 1759-7331
Quantitative Economics: Jul, 2014, Volume 5, Issue 2
This paper considers inference in log-linearized dynamic stochastic general equilibrium (DSGE) models with weakly (including un-) identified parameters. The framework allows for analysis using only part of the spectrum, say at the business cycle frequencies. First, we characterize weak identification from a frequency domain perspective and propose a score test for the structural parameter vector based on the frequency domain approximation to the Gaussian likelihood. The construction heavily exploits the structures of the DSGE solution, the score function, and the information matrix. In particular, we show that the test statistic can be represented as the explained sum of squares from a complex-valued Gauss–Newton regression, where weak identification surfaces as (imperfect) multicollinearity. Second, we prove that asymptotically valid confidence sets can be obtained by inverting this test statistic and using chi-squared critical values. Third, we provide procedures to construct uniform confidence bands for the impulse response function, the time path of the variance decomposition, the individual spectrum, and the absolute coherency. Finally, a simulation experiment suggests that the test has adequate size even with relatively small sample sizes. It also suggests it is possible to have informative confidence sets in DSGE models with unidentified parameters, particularly regarding the impulse response functions. Although the paper focuses on DSGE models, the methods are applicable to other dynamic models with well defined spectra, such as stationary (factor-augmented) vector autoregressions. Keywords. Business cycle, frequency domain, likelihood, impulse response, inference, rational expectations models, weak identification. JEL classification. C12, C32, E1, E3.
March 5, 2024
The terms of the Editors of the Econometric Society's three journals end June 30, 2025. We are pleased to announce the incoming Editors and to thank the outgoing Editors for their excellent and continuing service.
Econometrica: Since 2019, Guido Imbens has served as the 14th Editor of Econometrica. On July 1, 2025, Marina Halac will become the Editor.
Quantitative Economics: Stéphane Bonhomme has been the Editor of Quantitative Economics since 2021. His successor will be Bernard Salanié.
Theoretical Economics: The Editor of Theoretical Economics since 2021 has been Simon Board. Taking over for him in July 2025 will be Federico Echenique.
Guido, Stéphane, and Simon have been outstanding Editors. We are grateful to them for the work they have done and will continue to do, and we look forward to further congratulating them next year. We believe Marina, Bernard, and Federico will be outstanding successors and we thank them in advance for their service.
Finally, we are grateful to Larry Samuelson for chairing all three search committees, and we thank the search committee members for their hard and fruitful work:
Econometrica: Christian Dustmann, Lars Hansen, Alessandro Lizzeri, George Mailath, Ariel Pakes, Helene Rey, and Elie Tamer.
QE: Kate Ho, Michael Keane, Felix Kubler, Whitney Newey, and Frank Schorfheide.
TE: Jeff Ely, Johannes Horner, Gilat Levy, Meg Meyer, and Ran Spiegler.