DSGE Research Papers - Academia.edu (original) (raw)

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- Econometrics, Applied Economics, Bayesian Analysis, Literature Review

Ana María Aguilar (Banco de México) Fabio Balboni (HM Treasury) Emanuele Baldacci (ISTAT) Sebastian Barnes (OECD) Antonio Bassanetti (Banca d'Italia) Cláudia Rodrigues Braz (Banco de Portugal) Adi Brender (Central Bank of Israel) Anne-Marie Brook (New Zealand Treasury) Sascha Bützer (Ludwig-Maximilians-Universität München) Matteo Bugamelli (Banca d'Italia) Panagiotis Chronis (Bank of Greece) Carlos Cuerpo (European Commission) Jorge Cunha (Banco de Portugal) Roberta De Stefani (European Central Bank) Elena Deryugina (Bank of Russia) Francesco Di Comite (European Commission) Inês Drumond (European Commission) Gilles Dufrenot (Banque de France) Kazuhiko Ejima (Ministry of Finance, Japan) Jonas Fischer (European Commission) Daniele Franco (Banca d'Italia) Niels Gilbert (De Nederlandsche Bank) Raffaela Giordano (Banca d'Italia) Gabriele Giudice (European Commission) Rauf Gönenç (OECD) Andrés González (Central Bank of Colombia) Sanjeev Gupta (IMF) Fuad Hasanov (IMF) Sebastian Hauptmeier (Ministry of Finance, Germany

- by Daniele Franco
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- Economics, Monetary Policy, DSGE, Saving

This paper develops a dynamic stochastic general equilibrium model with interactions between an heterogeneous banking sector and other private agents. We introduce endogenous default probabilities for both firms and banks, and allow for bank regulation and liquidity injection into the interbank market. Our aim is to understand the importance of supervisory and monetary authorities to restore financial stability. The model is calibrated against real data and used for simulations. We show that liquidity injections reduce financial instability but have ambiguous effects on output fluctuations. The model also confirms the partial equilibrium literature results on the procyclicality of Basel II.

- by Gregory de Walque
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- Economics, Money, DSGE, Default Risk

The global financial crisis has reaffirmed the importance of financial factors for macroeconomic fluctuations. Recent work has shown how the conventional pre-crisis prescription that monetary policy should pay no attention to financial variables over and above their effects on inflation may no longer be valid in models that consider frictions in financial intermediation ). This paper analyzes whether Taylor rules augmented with asset prices and credit can improve upon a standard rule both in terms of macroeconomic stabilization and of agents' welfare in a DSGE with both a firms' balance-sheet channel and a bank-lending channel and in which the spread between lending and policy rates endogenously depends on banks' leverage. The main result is that, even in a model in which financial stability does not represent a distinctive policy objective, leaning-against-the-wind policies are desirable in the case of supply-side shocks, while strict inflation targeting and a standard rule are less effective. The gains are amplified if the economy is characterized by high private sector indebtedness. Robustness shows that the interaction between financial frictions and debt-deflation effects is potentially very powerful. JEL: E30, E44, E50

- by Leonardo Gambacorta
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- Economic Theory, Applied Economics, Monetary Policy, DSGE

Given the economy's complex behavior and sudden transitions as evidenced in the 2007-08 crisis, agent-based models are widely considered a promising alternative to current macroeconomic practice dominated by DSGE models. Their failure is commonly interpreted as a failure to incorporate heterogeneous interacting agents. This paper explains that complex behavior and sudden transitions also arise from the economy's financial structure as reflected in its balance sheets, not just from heterogeneous interacting agents. It introduces "flow-of-funds" and "accounting" models, which were preeminent in successful anticipations of the recent crisis. In illustration, a simple balance-sheet model of the economy is developed to demonstrate that nonlinear behavior and sudden transition may arise from the economy's balance-sheet structure, even without any microfoundations. The paper concludes by discussing one recent example of combining flow-of-funds and agentbased models. This appears a promising avenue for future research.

- by Dirk Bezemer
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- Finance, Complex Systems, Complex System, DSGE

We construct a DSGE-VAR model for competing head to head with the long history of published forecasts of the Reserve Bank of New Zealand. We also construct a Bayesian VAR model with a Minnesota prior for forecast comparison. The DSGE-VAR model combines a structural DSGE model with a statistical VAR model based on the in-sample fit over the majority of New Zealand's inflation-targeting period. We evaluate the real-time out-of-sample forecasting performance of the DSGE-VAR model, and show that the forecasts from the DSGE-VAR are competitive with the Reserve Bank of New Zealand's published, judgmentally-adjusted forecasts. The Bayesian VAR model with a Minnesota prior also provides a competitive forecasting performance, and generally, with a few exceptions, out-performs both the DSGE-VAR and the Reserve Bank's own forecasts.

- by Kirdan Lees
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- Marketing, Econometrics, Forecasting, Bayesian methods

study proposes a methodology of constructing dynamic stochastic general equilibrium (DSGE) consistent prior distributions for Bayesian vector autoregressive (BVAR) models. The moments of the assumed Normal-Inverse-Wishart (no conjugate) prior distribution of the VAR parameter vector are derived using the results developed by Fernandez-Villaverde et al. (Am Econ Rev 97(1):21-26, 2007) , Christiano et al. (Assessing structural vars, 2006 and Ravenna (J Monet Econ 54(2):48-64, 2007) regarding structural VAR (SVAR) models and the normal prior density of the DSGE parameter vector. In line with the results from previous studies, BVAR models with theoretical priors seem to achieve forecasting performance that is comparable-if not better-to the one obtained using theory free 'Minnesota' priors (Doan, Econ Rev 3(1):1-100, 1984). Additionally, the marginal-likelihood of the time-series model with theory found priors-derived from the output of the Gibbs sampler-can be used to rank competing DSGE theories that aim to explain the same observed data (Geweke, Con- Bayesian econometrics and statistics, 2005). Finally, motivated by the work of Christiano et al. (Handbook of monetary economics, 2010a; Involuntary unemployment and the business cycle, 2010b) and Del Negro and Schorfheide (Int Econ Rev 45:643-673, 2004), we use the theoretical results developed by Chernozhukov and Hong (J Econom 115(2):293-346, distance estimator for DSGE models, 2011) to derive the quasi-Bayesian posterior distribution of the DSGE parameter vector.

- by Thomai Filippeli
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- Economics, Empirical Economics, DSGE, Gibbs sampling

the working paper series presents reports on matters in the sphere of activities of the riksbank that are considered to be of interest to a wider public. the papers are to be regarded as reports on ongoing studies and the authors will be pleased to receive comments. the views expressed in working papers are solely the responsibility of the authors and should not to be interpreted as reflecting the views of the executive board of Sveriges riksbank.

- by Lawrence Christiano
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- Unemployment, Bayesian estimation, High Frequency, DSGE

This paper presents US and euro area estimates for a fully heterogeneous model, in which there is a continuum of fi rms setting prices with a constant probability of adjustment, which may differ from fi rm to fi rm. The estimated model accurately matches the empirical distribution function of individual price durations for the US and the euro area. Incorporating these micro based pricing rules into a DSGE model, we fi nd that nominal shocks have a greater real impact in the fully heterogeneous economy than in the standard Calvo model. We also fi nd that nominal and real shocks bring about a reallocation of resources among sectors. Monetary policy is found to have a greater real impact in the euro area than in the United States.

- by Luis Alfonso Adel Alvarez
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- Economics, Heterogeneity, Monetary Policy, Euro Area

Modern DSGE models are microfounded and have deep parameters that should be invariant to changes in economic policy, so in principle they are not subject to the Lucas critique. But the literature has already established that misspecification issues also cause parameter instability after policy changes in DSGE models. This paper will look at the implications of parameter shifts for econometric policy evaluation, to see whether policy advice derived from DSGE models would have differed fundamentally from that which the policymakers of the 1970s derived from their reduced-form Phillips curves. The results show drift in most parameters, including those that are supposedly structural (such as the share of capital in production, habits or the elasticity of labor supply to the real wage), and major shifts in the impulse response functions derived from the real-time estimation of the model. After the expansionary monetary shocks of the early 1970s, a standard DSGE model would have behaved very similarly to an old-style Phillips curve, with marked shifts in parameter values and impulse response functions.

- by Samuel Hurtado
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- Econometrics, Macroeconomics, Applied Economics, DSGE

Descripción del algoritmo El algoritmo que presentamos es una variante del método propuesto por Brooks y Morgan [1]. Este algoritmo híbrido consta de dos componentes: 1 Simulated Annealing (SA): genera semillas o valores iniciales para la segunda componente. 2 Un algoritmo tradicional de búsqueda lineal o de región de confianza que usa la semilla generada por SA. Este algoritmo resuelve el problema de la alta sensibilidad de los resultados frente a la elección del valor inicial.

- by Andres Gonzalez
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- Simulated Annealing, Monte Carlo, DSGE, Desarrollo y Sociedad

- by Atri Mukherjee
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- Economics, Fiscal policy, Monetary Policy, DSGE
- by Giorgio Motta
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- Economic Theory, Applied Economics, Determinacy, DSGE

This paper presents US and euro area estimates for a fully heterogeneous model, in which there is a continuum of firms setting prices with a constant probability of adjustment, which may differ from firm to firm. The estimated model accurately matches the empirical distribution function of individual price durations for the US and the euro area. Incorporating these micro-based pricing rules into a DSGE model, we find that nominal shocks have a greater real impact in the fully heterogeneous economy than in the standard Calvo model. We also find that nominal and real shocks bring about a reallocation of resources among sectors. Monetary policy is found to have a greater real impact in the euro area than in the United States.

- by Pablo Burriel
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- Economics, Heterogeneity, Monetary Policy, Euro Area

La dinámica del tipo de cambio real es un aspecto crucial en macroeconomía internacional. Recientemente, varias contribuciones al estudio de esta dinámica se han realizado mediante Modelos Estocásticos Dinámicos de Equilibrio General (MEDEG) . En este trabajo presentamos un modelo de equilibrio general dinámico estocástico, que se estima para la economía venezolana mediante técnicas bayesianas. Se comparan diferentes variantes del modelo, para examinar empiricamente supuestos en torno a la ley de un sólo precio y a mercados completos de capitales. El modelo reproduce algunas de las características más relevantes de la economía venezolana, como la rigidez de precios y la relativa inmovilidad de capitales. Se compara las diferentes variantes del modelo y se analizan los efectos de los diferentes shocks en la dinámica del tipo de cambio real en Venezuela. Palabras y frases clave: modelo de equilibrio general, estimación bayesiana, economía abierta Clasificación JEL: B23, C11, C15, C50, D50 y D52

- by Daniel Barraez
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- Macroeconomics, DSGE

observed property prices are assembled from an unobservable 'real' property price linked to macroeconomic conditions and the interest rate environment, and a noisy component given by market sentiment. Between January 1993 and July 2007 all IPD index logarithmic returns were positive. This long series of positive returns created an illusion among investors. It implied that they did not give proper consideration to macroeconomic evidence. That changed fundamentally in 2008. During the subprime crisis investor behavior changed from illusion to disillusion and the market prices occasionally fell well below the level indicated by fundamental economic considerations. IPD property derivatives can, according to the author, be used for risk management purposes. Investors have access to Eurex futures that can be utilized to hedge out property risk and avoid the consequences of price crashes. Giovanni Dell'Ariccia and Deniz Igan, IMF Research have authored chapter 3: "Dealing with real estate booms". Until the global financial crisis, the main policy tenet in dealing with a real estate boom was one of 'benign neglect'. It was considered better to wait for the bust and pick up the pieces than to attempt to prevent the boom. The crisis challenged this view. But preventive policy action is difficult to implement. The authors conclude that policy efforts should focus on booms that are financed through credit and where leveraged institutions are directly involved. Macroprudential tools (such as limits on loan-to-value ratios) are the best candidates to deal with real estate booms as they can be aimed directly at curbing leverage and strengthening the financial sector. Cycles are a common feature of real estate markets. Stylized facts suggest that the longer and higher prices go up, the more they will come down. Housing cycles are closely intertwined with credit and business cycles. Peaks and troughs are not far from each other. There are significant differences across countries. Legal and institutional structures matter. In order to improve policy options, the quality of empirical data should be heightened. Real estate is an important storage of wealth in the economy. Monetary policy is a blunt instrument for the task at hand. It is difficult to use fiscal tools. So, macroprudential regulation in the form of higher capital requirements, dynamic provisioning and limits on loan-to-value and debtto-income ratios are the most promising options.

- by Radu Tunaru
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- Economics, Monetary Policy, Welfare, DSGE

The aim of this paper is to derive and replicate the quantitative analysis done in the original work. After solving the model and defining the system of equations, the effects of an exogenous shock on technology on the main variables of the system – namely output, consumption, investment, hours of work, trade balance, interest rate and debt level – during the deviation of the original steady state until the convergence to the equilibrium are analyzed.

JT03305345 Document complet disponible sur OLIS dans son format d'origine Complete document available on OLIS in its original format ECO/WKP(2011)53 Unclassified English -Or. English ECO/WKP(2011)53 2 ABSTRACT / RÉSUMÉ How Institutions... more

- by Rudiger Ahrend
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- Institutions, DSGE

The current financial crisis has made it abundantly clear that business cycle modeling can no longer abstract from financial factors. It is also clear that the current standard approach of modeling labor markets without explicit unemployment has its limitations. We extend what is becoming the standard new Keynesian model in three dimensions. First, we incorporate financial frictions in the accumulation and management of capital. Second, we model the labor market using a search and matching framework. Third, we extend the model into a small open economy setting. Finally, we estimate the model using Bayesian techniques with Swedish data. Our main results are as follows: (1) The financial shock to entrepreneurial wealth is pivotal for explaining business cycle fluctuations. It accounts for two-thirds of the variance in investment and a quarter of the variance in GDP. (2) The marginal efficiency of investment shock has very limited importance. The reason for this is that we match financial market data. (3) In contrast to the existing literature on estimated DSGE models, our model does not need any wage markup shocks or similar shocks with low autocorrelation to match the data. Furthermore, the low-frequency labor preference shock that we do allow is not important in explaining GDP. (4) The tightness of the labor market is unimportant for the cost of adjusting the workforce. In other words, there are costs of hiring but no significant costs of vacancy postings per se.

- by Lawrence Christiano
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- Economics, Economic Theory, Unemployment, Applied Economics

Resumen La evidencia empírica para Colombia muestra relaciones tanto positivas como negativas entre el crecimiento del producto y empleo, a diferencia de lo encontrado en economías desarrolladas como la de los Estados Unidos. El presente trabajo usa modelos VAR y de Equilibrio General Dinámico y Estocástico para abordar explicaciones de ese fenómeno. Los resultados obtenidos, usando datos trimestrales para Colombia, son consistentes para las dos metodologías; se encuentra que la correlación entre el producto y el empleo es condicional a la fuerza motora del ciclo económico. En particular se encuentra que choques tecnológicos inducen una correlación negativa entre producto y empleo, mientras choques no tecnológicos inducen la correlación contraria.

- by Norberto Rodríguez
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- Applied Economics, DSGE

- by Thomai Filippeli
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- Economics, Empirical Economics, DSGE, Gibbs sampling

We consider a NK-DSGE model with distortive taxation and heterogeneous agents, modeled using a modified version of the mechanism proposed by Bilbiie, Monacellli and Perotti (2012). We study the dynamics of the model in response to five shocks, under three different assumptions on the labor income tax rates: a) equal taxes, both agents face the same labor income tax rate; b) partial redistribution, both agents pay a tax but the tax rate on borrower labor income is lower than the tax rate on saver labor income; c) full redistribution, saver labor income is taxed while borrower labor income is subsidized at the same rate. In the analysis of expansionary fiscal policy, public debt increases more in a context of partial redistribution than in a context of full redistribution, due to the internalization of government budget constraint by savers. In addition, a negative saver tax shock has a negative impact on redistribution, which is exacerbated under partial redistribution. Finally, a ne...

- by Chiara Punzo
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- Sociology, Economics, Bayesian estimation, Public Debt

The Working Paper Series seeks to disseminate original research in economics and fi nance. All papers have been anonymously refereed. By publishing these papers, the Banco de España aims to contribute to economic analysis and, in particular, to knowledge of the Spanish economy and its international environment. The opinions and analyses in the Working Paper Series are the responsibility of the authors and, therefore, do not necessarily coincide with those of the Banco de España or the Eurosystem. The Banco de España disseminates its main reports and most of its publications via the INTERNET at the following website: . Reproduction for educational and non-commercial purposes is permitted provided that the source is acknowledged.

- by luis miguel Alvarez
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- Economics, Heterogeneity, Monetary Policy, Euro Area

We evaluate implications of inflation targeting versus fixed exchange rate regime for the UK, Sweden, Poland, the Czech Republic, Estonia, Latvia and Lithuania, i.e. seven EU non-euro area countries. To this end, we estimate a small open economy DSGE model and simulate a model under estimated structural parameters and different sets of policy parameters. The results obtained are compared in terms of inflation, output gap and interest rate volatility. For inflation targeting countries, a policy switch to fixed exchange rate would entail 3–6 times higher inflation volatility. In the Baltic economies, a policy change to inflation targeting with fully flexible exchange rate would amplify inflation volatility 2–4 times, whereas the existing price stabilisation and exchange rate fluctuations within the ERM II bands would entail 3–6 times more volatile inflation. Policy simulations thus show evidence that in all the countries the existing monetary rule guarantees more stable inflation and ...

- by Kristine Vitola
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- Bayesian estimation, DSGE, Working Papers, DSGE Model

The interbank market helps regulate liquidity in the banking sector. Banks with outstanding resources usually lend to banks that are in needs of liquidity. Regulating the interbank market may actually benefit the policy stance of monetary policy. Introducing an interbank market in a general equilibrium model may allow better identification of the final effects of non-conventional policy tools such as

- by Hugo Vega
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- Monetary Policy, DSGE, Working Papers, DSGE Model

Este artículo hace parte del proyecto "Evaluando la política fiscal y la política monetaria mediante un modelo de equilibrio general dinámico estocástico. Una aplicación para Colombia" apoyado por la Universidad EAFIT. Los posibles... more

- by Alvaro Hurtado
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- DSGE

"Normal forms of regular matrix polynomials via local rank factorization" 2011/2 Francesca Di Iorio, Stefano Fachin "A Sieve Bootstrap range test for poolability in dependent cointegrated panels" 2011/3 Maria Grazia Pittau, Shlomo Yitzhaki, Roberto Zelli "The makeup of a regression coefficient: An application to gender" 2011/4 Søren Johansen "The analysis of nonstationary time series using regression, correlation and cointegration-with an application to annual mean temperature and sea level"

- by Paolo Paruolo
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- DSGE, DSGE Model, VAR

Models based on the representative agent assumption cannot rationalize observed equity premia. In response to this, exchange economy models have introduced agents heterogeneity, typically in the form of bond and equity holders. We reconsider the issue introducing Limited Asset Market Participation in an otherwise standard medium scale DSGE model. Our model …ts …nancial and macroeconomic data well. We obtain that the correlation between asset holders consumption and …nancial returns strongly increases in the share of agents excluded from …nancial markets participation, The predicted unconditional equity premium is therefore large. Further, the strong correlation between dividends and Ricardian households' consumption unambiguously increases precautionary savings and reduces the riskless rate.

- by Patrizio Tirelli
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- Asset Pricing, DSGE, Equity Premium, Business Cycle

The 2002 Policy Targets Agreement (PTA) between the Reserve Bank of New Zealand and the government asks the Reserve Bank to target inflation "over the medium term"rather than over an annual target. This medium term objective shifts inflation targeting towards a "half-way house" between inflation targeting and price level targeting. Extending the inflation averaging horizon to the medium term improves the inflation-output tradeoff by influencing inflation expectations. But how long should the medium term be? Characterizing the New Zealand economy with a small new-Keynesian model, we show that the happiest halfway house is located around a two or three year averaging horizon which leads to mild, but non-trivial, improvements in the efficiency of monetary policy.

- by Kirdan Lees
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- Applied Economics, Monetary Policy, New Zealand, Money and Finance

Abstract: We evaluate the Smets-Wouters model of the US using indirect inference with a VAR representation of the main US data series. We find that the original New Keynesian SW model is on the margin of acceptance when SW's own... more

- by M. Wickens
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- Time Series, Economic Theory, Applied Economics, Regime change

Este documento presenta una revisión cronológica de los Modelos de Equilibrio General Dinámicos y Estocásticos (DSGE) desde 1995 hasta el 2011 desarrollados para la economía colombiana. Los modelos DSGE siguen la corriente de los nuevos modelos neo keynesianos y neoclásicos que se caracterizan por incluir optimización intertemporal, expectativas racionales, competencia imperfecta, costos de ajuste de precios y rigideces; pero aún les falta por incluir temas como la heterogeneidad en los consumidores y racionalidad limitada. Estos modelos son dinámicos por cuanto todas las decisiones que toman los agentes se consideran intertemporales y son estocásticos porque incorporan perturbaciones con incertidumbre que afectan de manera continua a la economía. En Colombia la mayoría de estos modelos se han diseñado para evaluar y pronosticar políticas monetarias, aun falta por desarrollar modelos que cubran mejor las políticas fiscales, el mercado y la informalidad laboral. Abstract: This paper ...

- by Ramiro Rodriguez Revilla
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- Economics, Monetary Economics, Mathematical Economics, Macroeconomics

The economic implications of oil price shocks have been extensively studied since the 1970s'. Despite this huge literature, no dynamic stochastic general equilibrium model was available that captures two well-known stylized facts: 1) the stagflationary impact of an oil price shock, together with 2) the influence of the energy productivity of capital on the depth and length of this impact. We build, estimate and simulate a New-Keynesian model with capital accumulation, which takes the case of an economy where oil is imported from abroad, and where these stylized facts can be accounted for. Moreover, the Bayesian estimation of the model on the US economy (1984-2007) suggests that the output elasticity of oil might have been above 10%, stressing the role of oil use in US growth at this time. Finally, our simulations confirm that an increase in energy efficiency significantly attenuates the effects of an oil shock-a possible explanation of why the third oil shock (1999-2008) did not have the same macroeconomic impact as the first two ones.

- by Gaël Giraud
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- Energy Policy, Energy efficiency, Multidisciplinary, Oil

We consider a model with frictional unemployment and staggered wage bargaining where hours worked are negotiated every period. The workers' bargaining power in the hours negotiation affects both unemployment volatility and inflation persistence. The closer to zero this parameter, (i) the more firms adjust on the intensive margin, reducing employment volatility, (ii) the lower the effective workers' bargaining power for wages and (iii) the more important the hourly wage in the marginal cost determination. This set-up produces realistic labor market statistics together with inflation persistence. Distinguishing the probability to bargain the wage of the existing and the new jobs, we show that the intensive margin helps reduce the new entrants wage rigidity required to match observed unemployment volatility.

- by Gregory de Walque
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- Wage bargaining, Monetary Policy, Search and Matching, Labor Market

We build a model with frictional unemployment and staggered wage bargaining and we assume that the two parties to the labor contract negotiate working time every period. We analyze the role of the workers bargaining power in the hours negotiation on unemployment volatility and in ‡ation persistence. The closer to zero is this parameter, (i) the more …rms adjust on the intensive margin, reducing employment volatility, (ii) the lower the e¤ective workers'bargaining power for wages and (iii) the more important is the hourly wage in the marginal cost determination. Combining staggered wage bargaining with a moderate workers' power in the hours negotiation, we are able to produce realistic labor market statistics together with in ‡ation persistence.

- by Gregory de Walque
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- Wage bargaining, Monetary Policy, Search and Matching, Labor Market

We consider a model with frictional unemployment and staggered wage bargaining where hours worked are negotiated every period. The workers' bargaining power in the hours negotiation affects both unemployment volatility and inflation persistence. The closer to zero this parameter, (i) the more firms adjust on the intensive margin, reducing employment volatility, (ii) the lower the effective workers' bargaining power for wages and (iii) the more important the hourly wage in the marginal cost determination. This setup produces realistic labor market statistics together with inflation persistence. Distinguishing the probability to bargain the wage of the existing and the new jobs, we show that the intensive margin helps reduce the new entrants wage rigidity required to match observed unemployment volatility.

- by Gregory de Walque
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- Economics, Wage bargaining, Monetary Policy, Social Science Research Network

The economic implications of oil price shocks have been extensively studied since the oil price shocks of the 1970s’. Despite this huge literature, no dynamic stochastic general equilibrium model is available that captures two well-known stylized facts: 1) the stagflationary impact of an oil price shock, together with 2) two possible reactions of real wages: either a decrease (as in the US) or an increase (as in Japan). We construct a New-Keynesian dsge model, which takes the case of an oil-importing economy where oil cannot be stored and where fossil fuels are used in two different ways: One part of the imported energy is used as an additional input factor next to capital and labor in the intermediate production of manufactured goods, the remaining part of imported energy is consumed by households in addition to their consumption of the final good. Oil prices, capital prices and nominal government spendings are exogenous random processes. We show that, without capital accumulation,...

- by Gaël Giraud
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- Oil, DSGE, Capital Accumulation, Stagflation

- by Andres Gonzalez
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- Physics, Simulated Annealing, Monte Carlo, DSGE

Non-technical summary 1 Introduction 2 The DSGE model 2.1 Final good producers 2.2 Intermediate goods producers 2.3 Households 2.4 Labor market 2.5 Closing the model 2.6 Solution and estimation 3 BVAR and DSGE-VAR models 3.1 Prior specifi... more

- by Michał Rubaszek
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- Economics, Economic Theory, Forecasting, Applied Economics

We reconsider the issue of equilibrium determinacy under the limited asset market participation hypothesis in a medium-scale model which accounts for external consumption habits. This allows to characterize concern for relative consumption in the preferences of agents which are heterogeneous in their wealth holdings. We find that external habits and consumption inequality have mutually reinforcing adverse e¤ects on determinacy. We therefore uncover a causality link between long-run inequality and macroeconomic volatility in a New-Keynesian DSGE model. In our framework, redistributive polices targeting consumption inequality have beneficial implications for macroeconomic stability..

- by Patrizio Tirelli
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- Determinacy, DSGE, DSGE Model, Asset Market

- by luis angel durango alvarez
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- Economics, Heterogeneity, Monetary Policy, Euro Area

- by Luis Rojas
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- Simulated Annealing, Monte Carlo, DSGE, Desarrollo y Sociedad

- by Humberto Franco
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- DSGE

- by Luis Alvarez
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- Economics, Heterogeneity, Monetary Policy, Euro Area
- by João Ricardo
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- Macroeconomics, DSGE Modeling, Matlab, Matlab Programming

In this paper, a New-Keynesian DSGE model for a small open economy integrated in a monetary union is developed and estimated for the Portuguese economy, using a Bayesian approach. Estimates for some key structural parameters are obtained and a set of exercises exploring the model's statistical and economic properties are performed. A survey on the main events and literature associated with DSGE models that motivated this study is also provided, as well as a comprehensive discussion of the Bayesian estimation and model validation techniques applied. The model features five types of agents namely households, firms, aggregators, the rest of the world and the government, and includes a number of shocks and frictions, which enable a closer matching of the short-run properties of the data and a more realistic short-term adjustment to shocks. It is assumed from the outset that monetary policy is defined by the union's central bank and that the domestic economy's size is negligible, relative to the union's one, and therefore its specific economic fluctuations have no influence on the union's macroeconomic aggregates and monetary policy. An endogenous risk-premium is considered, allowing for deviations of the domestic economy's interest rate from the union's one. Furthermore it is assumed that all trade and financial flows are performed with countries belonging to the union, which implies that the nominal exchange rate is irrevocably set to unity.

- by Vanda Almeida
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- Economics, Bayesian, Monetary Policy, DSGE

We re% connect money to inflation using Goodfriend and McCallumns (2007) model where banks supply loans to cash% in% advance constrained consumers on the basis of the value of collateral provided and the monitoring skills of banks. We... more

- by Sean Holly
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- Economics, Money, DSGE, Economics and Development studies
- by Grzegorz Szafrański
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- Economics, DSGE

En este artículo se utiliza un modelo de equilibrio general dinámico estocástico (DSGE) paraevaluar el impacto de choques de oferta (productividad) y demanda (comercio externo) sobre eldesempeño económico. En particular, este trabajo analiza el impacto de las políticas fiscales, específicamente el efecto del gasto público en determinados entornos económicos, como el colombiano.Los ejercicios realizados muestran que en un modelo de economía abierta, una políticaexpansiva de gasto público incrementa en el corto plazo el empleo y el producto, pero se incurre en un costo futuro, que parece sugerir un impacto superior al beneficio alcanzado en el corto plazo.

- by Alvaro Hurtado
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- Economics, DSGE

Member countries of the Economic and Monetary Union (EMU) initiated wide-ranging labour market reforms in the last decade. This process is ongoing as countries that are faced with serious labour market imbalances perceive reforms as the fastest way to restore competitiveness within a currency union. This fosters fears among observers about a beggar-thy-neighbour policy that leaves non-reforming countries with a loss in competitiveness and an increase in foreign debt. Using a two-country, two-sector search and matching DSGE model, we analyse the impact of labour market reforms on the transmission of macroeconomic shocks in both, non-reforming and reforming countries. By analysing the impact of reforms on foreign debt, we contribute to the debate on whether labour market reforms increase or reduce current account imbalances.

- by Timo Baas
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- Economics, DSGE, Current Account Deficit, Labour Market reforms