We use a standard quantitative business cycle model with nominal price and wage rigidities to estimate two measures of economic inefficiency in recent U.S. data: the output gap - the gap between the actual and effcient levels of output - and the labor wedge|the wedge between households' marginal...

We analyse the panel of the Greenbook forecasts (sample 1970-1996) and a large panel of monthly variables for the US (sample 1970-2003) and show that the bulk of dynamics of both the variables and their forecasts is explained by two shocks. Moreover, a two factor model which exploits, in real...

We investigate identifiability issues in DSGE models and their consequences for parameter estimation and model evaluation when the objective function measures the distance between estimated and model impulse responses. We show that observational equivalence, partial and weak identification...

This paper addresses the issue of forecasting the term structure. We provide a unified state-space modelling framework that encompasses different existing discrete-time yield curve models. within such framework we analyze the impact on forecasting performance of two crucial modelling choices,...

This paper aims to test some implications of the fiscal theory of the price level (FTPL). We develop a model similar to Leeper (1991) and Woodford (1996), but extended so to generate real effects of fiscal policy also in the "Ricardian" regime, via an OLG demographic structure. We test on the...

Equilibrium business cycle models have typically less shocks than variables. As pointed out by Altug, 1989 and Sargent, 1989, if variables are measured with error, this characteristic implies that the model solution for measured variables has a factor structure. This paper compares estimation...

We develop and estimate a medium scale macroeconomic model that allows for unemployment and staggered nominal wage contracting. In contrast to most existing quantitative models, employment adjustment is on the extensive margain and the employment of existing workers is efficient. Wage rigidity,...

We use frequency domain techniques to estimate a medium-scale DSGE model on different frequency bands. We show that goodness of t, forecasting performance and parameter estimates vary substantially with the frequency bands over which the model is estimated. Estimates obtained using subsets of...

We investigate the role of "noise" shocks as a source of business cycle fl uctuations. To do so we set up a simple model of imperfect information and derive restrictions for identifying the noise shock in a VAR model. The novelty of our approach is that identification is reached by means of...

A structural Factor-Augmented VAR model is used to evaluate the role of "news" shocks in generating the business cycle. We find that (i) existing small-scale VAR models are affected by "non-fundamentalness" and therefore fail to recover the correct shock and impulse response functions; (ii) news...