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An estimated dynamic stochastic general equilibrium model of the euro area. NBB Working Paper Nr. 35

Smets, Frank and Wouters, Raf (2002) An estimated dynamic stochastic general equilibrium model of the euro area. NBB Working Paper Nr. 35. [Working Paper]

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    Abstract

    This paper develops and estimates a dynamic stochastic general equilibrium (DSGE) model with sticky prices and wages for the euro area. The model incorporates various other features such as habit formation, costs of adjustment in capital accumulation and variable capacity utilisation. It is estimated with Bayesian techniques using seven key macro-economic variables: GDP, consumption, investment, prices, real wages, employment and the nominal interest rate. The introduction of ten orthogonal structural shocks (including productivity, labour supply, investment, preference, cost-push and monetary policy shocks) allows for an empirical investigation of the effects of such shocks and of their contribution to business cycle fluctuations in the euro area. Using the estimated model, the paper also analyses the output (real interest rate) gap, defined as the difference between the actual and model-based potential output (real interest rate).

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    Item Type: Working Paper
    Uncontrolled Keywords: DSGE models.
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > economic and financial affairs > general
    EU policies and themes > Policies & related activities > economic and financial affairs > EMU/EMS/euro
    Subjects for EU documents: UNSPECIFIED
    EU Series: UNSPECIFIED
    ["eprint_fieldname_eusries" not defined]: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > National Bank of Belgium (Brussels) > Working Papers
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 25 Jun 2003
    Page Range: p. 65
    Last Modified: 15 Feb 2011 17:15
    URI: http://aei.pitt.edu/id/eprint/621

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