DSGE Models with Student-t Errors |
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| Authors: | Siddhartha Chib Srikanth Ramamurthy |
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| Affiliation: | 1. Olin Business School , Washington University in St. Louis , St. Louis , Missouri , USA chib@wustl.edu;3. Sellinger School of Business , Loyola University Maryland , Baltimore , Maryland , USA |
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| Abstract: | 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. |
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| Keywords: | Bayesian inference Marginal likelihood MCMC Metropolis-Hastings Particle-filtering State-space model Multivariate-student-t distribution |
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