Economics, Econometrics and Finance
3 years ago

Monetary policy models may be misleading, impacting economic decisions.

RePEc: Research Papers in Economics
Testing for Spurious Dynamics in Structural Models with Applications to Monetary Policy
Mikhail Dmitriev, Manoj Atolia

Paper Summary

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The article tests structural models by simulating new data and checking if the results change. Simple SVAR models work well for analyzing monetary policy, while DSGE models like Smets and Wouters (2007) do not pass the test and may not accurately reflect the data.