Bayesian Working Group: Bayesian Structural Estimation of Dynamic Stochastic General Equilibrium (DSGE) models
Presenter: Kaushiki Singh, PhD Student, Department of Economics, Iowa State University
Title: Bayesian Structural Estimation of Dynamic Stochastic General Equilibrium (DSGE) models
Small open Economy Dynamic Stochastic General Equilibrium (DSGE) models have become the workhorse models for policy analysis and forecasting for over two decades now. Taking cue from the existing literature, this piece of research tries to extend the work by E.G. Mendoza (American Economic Review, 1991). Mendoza formulated a Small open Economy Real Business Cycle (RBC) model and through parameterization, calibration and simulation analyzed whether his model could explain the postwar Canadian business fluctuations. To extend his work, the model is first simulated by using the calibrated parameters provided by the author. The simulated data is then used to estimate the parameters of the model using Bayesian methods. Estimation results show that some of the estimated parameters are economically plausible. The Bayesian estimation is then extended to estimate the parameters using the data for Canada. This is work in progress.