Creator: Christiano, Lawrence J. and Den Haan, Wouter J., 1962- Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 199 Abstract:
We investigate, by Monte Carlo methods, the finite sample properties of GMM procedures for conducting inference about statistics that are of interest in the business cycle literature. These statistics include the second moments of data filtered using the first difference and Hodrick-Prescott filters, and they include statistics for evaluating model fit. Our results indicate that, for the procedures considered, the existing asymptotic theory is not a good guide in a sample the size of quarterly postwar U.S. data.
Keyword: Monte Carlo simulation, Covariance matrix estimation, Hypothesis testing, Spectral density, Prewhitening, and Finite-sample analysis