Choosing Priors for ML-Estimation of DSGE Models

[aeguf]

Hello there,

I want to estimate the parameters of a very specific DSGE model and therefore need to specify the priors. Inserting values from the literature for the prior mean and choosing the type of distribution function seems plausible to me. But how do I choose the standard deviation, since I can’t find values for many parameters in the literature? Are there any rules/best practices that I need to follow?

Thank you!

[jpfeifer]

Please search the forum. This has been discussed a few times before, e.g.

Choosing an appropriate standard deviation for prior

I wonder if it is possible for you to answer my following question about the estimation of the parameters in DSGE models. Due to a debate between me and some of my colleagues about the selection of proper standard deviation of prior for an specific parameter, I claimed that this value for standard deviation is subjective and in a Pdfs such as Gamma distribution, it is not really important to be 0.1 or 0.01 or 0.001. In other word, I claimed that if I could make a Gamma distribution with a sta…