DSGE Model

We introduce banks, modeled as in Diamond and Rajan (JoF 2000 or JPE 2001), into a standard DSGE model and use this framework to study the role of banks in the transmission of shocks, the effects of monetary policy when banks are exposed to runs, and the interplay between monetary policy and Basel-like capital ratios. In equilibrium, bank leverage depends

This paper is a contribution to the forthcoming Edward Elgar Handbook of the History of Economic Analysis volume edited by Gilbert Faccarello and Heinz Kurz. Its aim is to introduce the reader to the main episodes that have marked the course of modern macroeconomics: its emergence after the publication of Keynes’s General Theory, the heydays of Keynesian macroeconomics based on

The paper documents elements of work on the dynamic stochastic general equilibrium (DSGE) SOEPL model that has been carried out in recent years at the National Bank of Poland. In 2009 a new version of the model was developed (called SOEPL−2009) which in 2010 is to support an econometric model and experts’ forecasts in mid-term forecasting of inflation and economic

There are many issues associated with the Eurozone accession of Poland. The goal of this paper is to analyse one, but very important aspect, namely - the macroeconomic impact of the loss of autonomous monetary policy. In order to answer this question, we build a two country DSGE model with sticky prices. We begin by evaluating the performance of our model. Next, we investigate how joining the Eurozone will affect the business cycle behaviour of the main macroeconomic variables in Poland. We find that the Euro adoption will have a noticeable impact on the Polish economic fluctuations. In particular, the volatility of domestic output increases and the volatility of inflation decreases. Also, in order to quantify the effect of the Euro adoption, we compute the welfare effect of this monetary policy change. Our findings suggest that the welfare cost is not large.

A growing number of papers have studied positive and normative implications of financial frictions in DSGE models. We contribute to this literature by studying the welfare-based monetary policy in a two-country model characterized by financial frictions, alongside a number of key features, like capital accumulation, non-traded goods and foreign-currency debt denomination. We compare the cooperative Ramsey monetary policy with standard

This paper develops a DSGE model for an open economy and estimates it on euro area data using Bayesian estimation techniques. The model features nominal and real frictions, as well as financial frictions in the form of liquidity constrained households. The model incorporates active monetary and fiscal policy rules (for government consumption, investment, transfers and wage taxes) and can be used to analyse the effectiveness of stabilisation policies. To capture the unit root character of macroeconomic time-series we allow for stochastic trend in TFP, but instead of filtering data prior to estimation, we estimate the model in growth rates and stationary nominal ratios.

El documento estudia la transferencia de la incertidumbre fiscal sobre la economía y el sistema financiero durante el periodo 2007-2018, utilizando modelos multivariados de volatilidad (mGARCH) y Vectores Autoregresivos Estructurales (SVAR) con series de varianzas condicionales, que permiten obtener la dinámica temporal de las fluctuaciones no anticipadas de las series fiscales y estudiar su efecto contagio condicionado al estado de la economía. Los resultados indican volatilidades cambiantes en el tiempo, con reversión a la media, “clusters” y apalancamiento. Adicionalmente, las series fiscales muestran mayor dispersión relativa, independientemente al estado de la economía, pero en especial en contextos de aceleración de la actividad económica por encima de la potencial o de caídas en el nivel de actividad; estando la volatilidad del gasto público más fuertemente correlacionada con las variables económicas en momentos de alta instabilidad económica y fiscal. En términos de transferencia de incertidumbre fiscal, se identifica un persistente contagio de la volatilidad del gasto público sobre el nivel de actividad económica y su volatilidad; además, se verifican efectos ARCH sobre las fluctuaciones de la inflación, el tipo de cambio, el crédito y las tasas de interés; observándose también causalidad de las series condicionales de volatilidad fiscal sobre la actividad económica, los indicadores de resultados del sistema financiero y las tasas de interés. Por tanto, se obtiene evidencia de incidencia de la volatilidad fiscal sobre los mecanismos de trasmisión de la política monetaria, la actividad económica, la estabilidad de precios y las condiciones macro-prudenciales.

Department of Economics University of Surrey Guildford Surrey GU2 7XH, UK Telephone +44 (0)1483 689380 Facsimile +44 (0)1483 689548 Web www.econ.surrey.ac.uk ISSN: 1749-5075 ... ON THE (IR)RELEVANCE OF DIRECT SUPPLY-SIDE ... On the (ir)relevance of direct ...

We develop a closed-economy DSGE model of the Indian economy and estimate it by Bayesian Maximum Likelihood methods using Dynare. We build up in stages to a model with a number of features important for emerging economies in general and the Indian economy in particular: a large proportion of credit-constrained consumers, a financial accelerator facing domestic firms seeking to finance their investment, and an informal sector. The simulation properties of the estimated model are examined under a generalized inflation targeting Taylor-type interest rate rule with forward and backward-looking components. We find that, in terms of model posterior probabilities and standard moments criteria, inclusion of the above financial frictions and an infor- mal sector significantly improves the model fit.

This paper is a contribution to the forthcoming Edward Elgar Handbook of the History of Economic Analysis volume edited by Gilbert Faccarello and Heinz Kurz. Its aim is to introduce the reader to the main episodes that have marked the course of modern macroeconomics: its emergence after the publication of Keynes’s General Theory, the heydays of Keynesian macroeconomics based on the IS-LM model, disequilibrium and non-Walrasian equilibrium modelling, the invention of the natural rate of unemployment notion, the new classical attack against Keynesian macroeconomics, the first wave of new Keynesian models, real business cycle modelling and, finally, the second wage of new Keynesian models, i.e. DSGE models. A main thrust of the paper is the contrast we draw between Keynesian macroeconomics and stochastic dynamic general equilibrium macroeconomics. We hope that our paper will be useful for teachers of macroeconomics wishing to complement their technical material with a historical addendum.

In this paper, we propose a search and matching model with nominal stickiness à la Calvo in the wage bargaining. We analyze the properties of the model, first, in the context of a typical real business cycle model driven by stochastic productivity shocks and second, in a fully specified monetary DSGE model with various real and nominal rigidities and multiple

We construct an open-economy DSGE model with a banking sector to analyse the impact of the recent credit crunch on a small open economy. In our model the banking sector operates under monopolistic competition, collects deposits and grants collateralized loans. Collateral effects amplify monetary policy actions, interest rate stickiness dampens the transmission of interest rates, and financial shocks generate non-negligible

The present article extends a variant of the Obstfeld/Rogoff (2001) two-country DSGE model by introducing Calvo (1983) pricing. It is possible to collapse the model into a canonical log-linear representation consisting of two dynamic IS and two New Keynesian Phillips curves. Re°ecting the di®ering statutes of the ECB and the Fed, two diverging interest-rate rules are introduced. For a sensible

This paper describes a dynamic stochastic general equilibrium model featuring a fraction of non-Ricardian agents in order to estimate the effects of fiscal policy in the euro area by means of Bayesian techniques. The model accounts for distortionary taxation on labor and capital income and on consumption, while expenditures are broken down into purchases of goods and services, compensation of