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Working Paper
Structural Estimation with Unstructured Data
Standard macroeconomic data do not cleanly separate the systematic and nonsystematic components of monetary policy. We show that incorporating unstructured text data into the structural estimation of a DSGE model can sharpen this distinction. We augment a standard state-space model with a non-core measurement block that links structural shocks to time series derived from FOMC transcripts, using a spike-and-slab prior to let the data select which series are informative. In a medium-scale New Keynesian model for the U.S., incorporating text improves predictive performance and materially alters ...