CEF.UP – ECO Seminar/Webinar

Tuesday – November 29^th, 2022, at 1:00 p.m. |Room 305| Online

“Spectral decomposition of the information about latent variables in dynamic macroeconomic models”

 Nikolay Iskrev – Banco de Portugal

Abstract:

“In this paper, I show how to perform spectral decomposition of the information about latent variables in dynamic economic models. A model describes the joint probability distribution of a set of observed and latent variables. The amount of information transferred from the former to the latter is measured by the reduction of uncertainty in the posterior compared to the prior distribution of any given latent variable. Casting the analysis in the frequency domain allows decomposing the total amount of information in terms of frequency-specific contributions as well as in terms of information contributed by individual observed variables. I illustrate the usefulness of the proposed methodology with applications to two DSGE models taken from the literature.”