Identifying volatility shocks using method_of_moments

Estimation SMM/GMM/IRF-Matching
1

Hi dears,

I am interested in estimating the parameters of two uncertainty shocks in my model, that are modeled as AR(1) processes with Stochastic Volatility. I was wondering if I can estimate them using the Dynare command method_of_moments. In the case that it is possible, Which moments should I match??

Thank you in advance

2

Yes, you can do that. The problem is coming up with moment restrictions that identify the volatility parameters in question.

3

Thanks for the answer Professor, Any suggestion of moment restrictions that can identify the parameters of my uncertainty shock (it is a productivity shock with SV)???

4

Not really. You may want to have a look at Basu/Bundick (2017). They use a combination of IRF and moment matching. That may work, but cannot be easily done in Dynare.