View Leeper and Zha (2003) inspired modesty tests from conditional forecasting exercises of DSGE-VAR models. Conditional forecasts concerns prediction of the observed variables of the DSGE model conditional on a certain path and length of path for a subset of the observed variables. The modesty analysis aims at discovering if the conditional forecasts are subject to the Lucas (1976) critique, or if the conditioning assumptions may be viewed as modest (policy interventions).
YADA can compute modesty tests for the initial parameter values, the posterior mode values, and for draws from the posterior or the prior distribution. The tests depend on the method for conditional forecasting: (1) values for shocks, and (2) distribution of shocks.
Additional Information
• | A more detailed description about modesty statistics for DSGE-VAR models can be found in Section 16.9.3 of the YADA Manual. |
• | Conditional predictive distributions for the DSGE-VAR are discussed in Section 16.9. |
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