Estimating Nonlinear Approximation of DSGE Models: the Case of Czech Economy

Warning

This publication doesn't include Faculty of Education. It includes Faculty of Economics and Administration. Official publication website can be found on muni.cz.
Authors

LIŠČINSKÝ Zdeněk VAŠÍČEK Osvald

Year of publication 2010
Type Article in Proceedings
Conference Mathematical Methods in Economics 2010
MU Faculty or unit

Faculty of Economics and Administration

Citation
Field Economy
Keywords DSGE models; nonlinear approximation; particle filter
Description The aim of this paper is to estimate nonlinear approximation of a New Keynesian DSGE model of Czech economy and to compare the results with the results obtained from standard estimation procedure which uses (log)linear approximation of the model. Several authors, e.g. An and Schorfheide (2006), Fernandez-Villaverde and Rubio-Ramirez (2005), have used baseline models and/or simulated data to show that the nonlinear approach provides more accurate estimates and better data fit. In our application we use slightly modified Liu's (2005) open economy model. We solve the model for second-order approximation and estimate it by Bayesian techniques, particularly evaluate its likelihood function with particle filter. For computations we employed standard Matlab functions and also developed our own procedures.
Related projects:

You are running an old browser version. We recommend updating your browser to its latest version.