DSGE Models with Student-t Errors

This paper deals with Dynamic Stochastic General Equilibrium (DSGE) models under a multivariate student-t distribution for the structural shocks. Based on the solution algorithm of Klein (2000) and the gamma-normal representation of the t-distribution, the TaRB-MH algorithm of Chib and Ramamurthy (2010 Chib , S. , Ramamurthy , S. ( 2010 ). Tailored randomized block MCMC methods with application to DSGE models . Journal of Econometrics 108 : 19 – 38 .Crossref], Web of Science ®] , Google Scholar]) is used to estimate the model. A technique for estimating the marginal likelihood of the DSGE student-t model is also provided. The methodologies are illustrated first with simulated data and then with the DSGE model of Ireland (2004 Ireland , P. N. ( 2004 ). Technology shocks in the new keynesian model . Review of Economics and Statistics 86 ( 4 ): 923 – 936 .Crossref], Web of Science ®] , Google Scholar]) where the results support the t-error model in relation to the Gaussian model.