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DATA REVISIONS IN THE ESTIMATION OF DSGE MODELS

Published online by Cambridge University Press:  28 January 2016

Miguel Casares  and
Jesús Vázquez
Miguel Casares
Affiliation:
Universidad Pública de Navarra
Jesús Vázquez*
Affiliation:
Universidad del País Vasco (UPV/EHU)
*
Address correspondence to: Jesús Vázquez, Department FAE II, Universidad del País Vasco (UPV/EHU), Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain; e-mail: jesus.vazquez@ehu.es.
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Abstract

Revisions of U.S. macroeconomic data are persistent, correlated with real-time data, and with high variability (around 80% of U.S. real-time data volatility). This paper adapts a DSGE-style model to accommodate both real-time and revised data from the U.S. economy. The results show a lesser role of both habit formation and price indexation than in the standard model. In the simulations, revision shocks to both output and inflation are expansionary because the Fed reacts by cutting interest rates. Consumption revisions, in contrast, are countercyclical, consumption mirrors the observed reduction in real-time consumption. In the variance decomposition, data revisions explain 9.3% of output changes.

Keywords

Data RevisionsDSGE ModelsBusiness Cycles

Information

Type
Articles
Information
Macroeconomic Dynamics , Volume 20 , Issue 7 , October 2016 , pp. 1683 - 1716
Copyright
Copyright © Cambridge University Press 2016 

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