DP7157 The Econometrics of DSGE Models

Author(s): Jesús Fernández-Villaverde

Publication Date: February 2009

Keyword(s): Bayesian Methods , DSGE Models , Likelihood Estimation

JEL(s): C11 , C13 , E30

Programme Areas: International Macroeconomics

Link to this Page: www.cepr.org/pubs/dps/DP7157.asp.asp

In this paper, I review the literature on the formulation and estimation of dynamic stochastic general equilibrium (DSGE) models with a special emphasis on Bayesian methods. First, I discuss the evolution of DSGE models over the last couple of decades. Second, I explain why the profession has decided to estimate these models using Bayesian methods. Third, I briefly introduce some of the techniques required to compute and estimate these models. Fourth, I illustrate the techniques under consideration by estimating a benchmark DSGE model with real and nominal rigidities. I conclude by offering some pointers for future research.