US | What do we gain from matching the responses of a DSGE with those of a structural VAR?

Even though having economic intuition helps one understand the impulse response functions to a given macroeconomic shock, in my opinion it is not enough to choose any of the impulse response options derived from different specifications of reduced form models and/or methods for identifying structural shocks.

Key points

• Key points:
• The estimated parameters of the DSGE model from matching the impulse responses to a monetary shock are more similar to the traditionally estimated parameters for the identifications of Cholesky and sign restrictions with two lags in the BVAR model.
• This is relevant given that the BIC and AIC statistical criteria chose one lag as the optimal number for the BVAR model.
• The inflation response of the DSGE model to a monetary shock is somewhat away from the significant and sudden fall seen in the median impulse response from all admissible structural models under sign restrictions with one lag in the BVAR model.

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