Evaluation and indirect inference estimation of inattentive features in a New Keynesian framework

We test the standard New Keynesian (NK) dynamic stochastic general equilibrium (DSGE) model with and without inattentiveness features, where inattentiveness is modeled either in the form of sticky information (SI) or imperfect information (IF) data revision. All models are estimated and tested by in...

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Bibliographic Details
Published inJournal of forecasting Vol. 42; no. 3; pp. 530 - 542
Main Authors Chou, Jenyu, Cao, Yifei, Minford, Patrick
Format Journal Article
LanguageEnglish
Published Chichester Wiley Periodicals Inc 01.04.2023
Subjects
DSGE
inattentive expectation
indirect inference
New Keynesian
Tests
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Summary:We test the standard New Keynesian (NK) dynamic stochastic general equilibrium (DSGE) model with and without inattentiveness features, where inattentiveness is modeled either in the form of sticky information (SI) or imperfect information (IF) data revision. All models are estimated and tested by indirect inference. The estimated model with sticky information somewhat outperformed the estimated NK model with full‐information rational expectation (FIRE), though both passed the test easily, while the model with IF data revision was strongly rejected.
ISSN:0277-6693
1099-131X
DOI:10.1002/for.2950