期刊名称：Discussion Papers in Economics / Department of Economics, University of Surrey
出版年度：2014
出版社：University of Surrey
摘要：This paper contributes to an emerging literature that brings the constant elasticityof substitution (CES) specification of the production function into the analysisof business cycle fluctuations. Using US data, we estimate by Bayesian methods amedium-sized DSGE model with a CES rather than Cobb-Douglas (CD) technology.The main empirical result is to confirm decisively the superiority of CES rather thanCD production functions in terms of model fit. We estimate a elasticity of substitutionof elasticity well below unity at 0.15-0.18 and in a marginal likelihood raceassuming equal prior model probabilities, CES beats the CD production decisively.The marginal likelihood improvement is matched by the ability of the CES model tofit the data in terms of second moments and a comparison with a DSGE-VAR furtherconfirms the ability of the CES model to reduce model misspecification. We find thatthe CES model performance is further improved when the estimation is carried outunder the imperfect information assumption. The principle reason for our result isthat the CES specification captures movements of factor shares at the business cyclefrequency. Hence the main message for DSGE models is that we should dismiss onceand for all the use of CD for business cycle analysis.
关键词：CES production function; DSGE model; Bayesion estimation; imperfect;information; DSGE-VAR
