Dynamic factor models and dynamic stochastic general equilibrium (DSGE) models are widely used for empirical research … financial data can be captured by relatively few common unobserved factors. Similarly, the dynamics in DSGE models are often … Giannoni(2006) combine a DSGE and a factor model into a data-rich DSGE model, in which DSGE states are factors and factor …

We evaluate two most popular approaches to implementing financial frictions into DSGE models: the Bernanke et al. (1999 …

This paper proposes a novel approach to introduce time-variation in structural parameters of DSGE models. Structural … parameters are allowed to evolve over time via an observation-driven updating equation. The estimation of the resulting DSGE … application to a DSGE model with time varying volatility for structural shocks is presented. The results indicate a significant …