Solving and estimating linearized DSGE models with VARMA shock processes and filtered data

Abstract

We derive recursive solutions to linearized DSGE models with VARMA exogenous driving forces of arbitrary order without inflating the state vector. Representing the solution in the frequency domain, we calculate the likelihood of a sequence of observations from the model, as well as its nonrecursively filtered (e.g., Hodrick–Prescott or Baxter–King) variant straightforwardly.

Alexander Meyer-Gohde

Professor of Financial Markets and Macroeconomics

My research interests include macroeconomics, macro-finance, econometrics, and numerical methods