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Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach
Abstract
Using a Bayesian likelihood approach, we estimate a dynamic stochastic general equilibrium model for the US economy using seven macroeconomic time series. The model incorporates many types of real and nominal frictions and seven types of structural shocks. We show that this model is able to compete with Bayesian Vector Autoregression models in out-of-sample prediction. We investigate the relative empirical importance of the various frictions. Finally, using the estimated model, we address a number of key issues in business cycle analysis: What are the sources of business cycle fluctuations? Can the model explain the cross correlation between output and inflation? What are the effects of productivity on hours worked? What are the sources of the “Great Moderation”? (JEL D58, E23, E31, E32)
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Cites
Discretion versus policy rules in practice
Taylor, J. B. (1993) · Carnegie-Rochester Conference Series on Public Policy · doi:10.1016/0167-2231(93)90009-l · Cited by 9,065
General methods for monitoring convergence of iterative simulations
Brooks, S. P., & Gelman, A. (1998) · Journal of Computational and Graphical Statistics · doi:10.1080/10618600.1998.10474787 · Cited by 6,045
Cited by
Monetary Policy Surprises, Credit Costs, and Economic Activity
Gertler, M., & Karadi, P. (2015) · American Economic Journal: Macroeconomics · doi:10.1257/mac.20130329 · Cited by 1,455
Fiscal Volatility Shocks and Economic Activity
Fernández-Villaverde, J., Guerrón-Quintana, P., Kuester, K., & Rubio-Ramírez, J. (2015) · American Economic Review · doi:10.1257/aer.20121236 · Cited by 938
Prior Selection for Vector Autoregressions
Giannone, D., Lenza, M., & Primiceri, G. E. (2015) · Review of Economics and Statistics · doi:10.1162/rest_a_00483 · Cited by 710
Coibion, O., Gorodnichenko, Y., & Wieland, J. (2012) · The Review of Economic Studies · doi:10.1093/restud/rds013 · Cited by 359
Have We Underestimated the Likelihood and Severity of Zero Lower Bound Events?
CHUNG, H., LAFORTE, J., REIFSCHNEIDER, D., & WILLIAMS, J. C. (2012) · Journal of Money, Credit and Banking · doi:10.1111/j.1538-4616.2011.00478.x · Cited by 278
Metadata
- Authors
- Smets, F., & Wouters, R.
- Venue
- American Economic Review
- Publisher
- American Economic Association
- Published
- 2007-05-01
- Volume
- 97
- Issue
- 3
- Pages
- 586-606
- ISSN
- 0002-8282 (ISSN-L)
- OpenAlex
- W3123970111
- Cited by
- 4,611
- References
- 2
- FWCI
- 337.61
- Type
- journal article
- Language
- en
- Open access
- closed
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
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