On Identification Of Bayesian DSGE Models
In recent years there has been increasing concern about the identification of parameters in Dynamic Stochastic General Equilibrium (DSGE) models. Given the structure of DSGE models it may be difficult to determine whether a parameter is identified. For the researcher using Bayesian methods, a lack of identification may not be evident since the posterior of a parameter of interest may differ from its prior even if the parameter is unidentified. The authors show that this can be the case even if the priors assumed on the structural parameters are independent.