The authors first quantify the degree of model misspecification and then illustrate its implications for the performance of different interest-rate feedback rules. The authors find that many of the prescriptions derived from the DSGE model are robust to model misspecification.
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Working Paper
Monetary Policy Analysis with Potentially Misspecified Models
September 2005
WP 06-04 – The paper proposes a novel method for conducting policy analysis with potentially misspecified dynamic stochastic general equilibrium (DSGE) models and applies it to a New Keynesian DSGE model along the lines of Christiano, Eichenbaum, and Evans (JPE2005) and Smets and Wouters (JEEA2003).
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