Chari, Kehoe, and McGrattan (2007) (CKM) show that a large class of dynamic stochastic general equilibrium (DSGE) models with various frictions and shocks is observationally equivalent to a benchmark real business cycle (RBC) model with correlated “wedges” in the RBC model’s first-order...

The paper asks how state of the art DSGE models that account for the conditional response of hours following a positive neutral technology shock compare in a marginal likelihood race. To that end we construct and estimate several competing small-scale DSGE models that extend the standard real...