Shocks and Frictions in U.S. Business Cycles: A Bayesian DSGE Approach

@article{Smets2007ShocksAF,
  title={Shocks and Frictions in U.S. Business Cycles: A Bayesian DSGE Approach},
  author={Frank Smets and Rafael Andre Wouters},
  journal={Econometrics eJournal},
  year={2007}
}
Using a Bayesian likelihood approach, we estimate a dynamic stochastic general equilibrium model for the US economy using seven macro-economic time series. The model incorporates many types of real and nominal frictions and seven types of structural shocks. We show that this model is able to compete with Bayesian Vector Autoregression models in out-of-sample prediction. We investigate the relative empirical importance of the various frictions. Finally, using the estimated model we address a… 
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