Work

Lack of identification of parameters in a simple behavioral macroeconomic model

Year: 2024

Type: article

Abstract: Identifiability of the parameters is an important precondition for consistent estimation of models designed to describe empirical phenomena. Nevertheless, many estimation exercises proceed without a preliminary investigation into the identifiability of its models. As a consequence, the estimates could be essentially meaningless if convergence to the ‘true’ parameters is not guaranteed in the pertinent problem. We provide some evidence here that such a lack of identification is responsible for the inconclusive results reported in recent literature on parameter estimates for a certain class of nonlinear behavioral New Keynesian models. We also show that identifiability depends on the subtle detailsof the model structure. Hence, a careful investigation of identifiability should preceed any attempt at estimation of such models.

Source: Journal of Economic Dynamics and Control

DOI: 10.1016/j.jedc.2024.104972

Author: Thomas Lux

Institutions: Universitat Jaume I, Christian-Albrechts-Universität zu Kiel

Language: English

Topic: Monetary Policy and Economic Impact

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $2,890

Funder: Generalitat Valenciana