Inoue, Atsushi; Kuo, Chun-Hung; Rossi, Barbara - C.E.P.R. Discussion Papers - 2014
In this paper we propose empirical methods for detecting and identifying misspecifications in DSGE models. We introduce wedges in a DSGE model and identify potential misspecification via forecast error variance decomposition (FEVD) and marginal likelihood analyses. Our simulation results based...