This paper studies the application of the simulated method of moments (SMM) to the estimation of nonlinear dynamic stochastic general equilibrium (DSGE) models. Monte-Carlo analysis is employed to examine the small-sample properties of SMM in specifications with different curvatures and departures from certainty equivalence. Results show that SMM is computationally efficient and delivers accurate estimates, even when the simulated series are relatively short. However, the small-sample distribution of the estimates is not always well approximated by the asymptotic Normal distribution. An empirical application to the macroeconomic effects of skewed disturbances shows that negatively skewed productivity shocks induce agents to accumulate additional capital and can generate asymmetric business cycles.
