Bayesian Analysis of DSGE Models

An, Sung Yong; Schorfheide, Frank

doi:10.2139/ssrn.880725

Cited by 556 publications

(832 citation statements)

References 122 publications

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“…The Bayesian techniques used for the estimation and evaluation of DSGE models are described in An and Schorfheide (2007), and following Canova and Sala (2009), our small sample Bayesian estimation results are robust.…”

Section: Introductionmentioning

confidence: 75%

Money and monetary policy in Israel during the last decade

Benchimol¹

2016

Journal of Policy Modeling

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This study examines how money and monetary policy have in‡uenced output and in ‡ation during the past decade in Israel by comparing two New Keynesian DSGE models. One is a baseline separable model (Galí, 2008) and the other assumes non-separable household preferences between consumption and money (Benchimol and Fourçans, 2012). We test both models by using rolling window Bayesian estimations over the last decade (2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009)(2010)(2011)(2012)(2013). The results of the presented dynamic analysis show that the sensitivity of output with respect to money shocks increased during the Dot-com, Intifada, and Subprime crises. The role of monetary policy increased during these crises, especially with regard to in ‡ation, even though the effectiveness of conventional monetary policy decreased during the Subprime crisis. In addition, the non-separable model including money provides lower forecast errors than the baseline separable model without money, while the in ‡uence of money on output ‡uctuations can be seen as a good predictive indicator of bank and debt risks. By impacting and monitoring households'money holdings, policy makers could improve their forecasts and crisis management through models considering monetary aggregates.

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Section: Introductionmentioning

confidence: 75%

Money and monetary policy in Israel during the last decade

Benchimol¹

2016

Journal of Policy Modeling

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“…The model we employ has a standard textbook small New Keynesian structure, similar to Clarida, Gali andGertler (1999), Ireland (2004) or An and Schorfheide (2007). In spite of its simple architecture and reduced dimensions, the model embeds certain features and rigidities present in medium-and large-scale seminal DSGE models, such as Smets and Wouters (2003), Christiano et al (2005), Adolfson et al (2007) or Christiano et al (2011).…”

Section: The Modelmentioning

confidence: 99%

“…Ireland (2004) and An and Schorfheide (2007) derive and estimate small New Keynesian models with sticky prices using three observable variables (similar to the model employed in this paper). The next generation of DSGE models includes Smets and Wouters (2003) and Christiano, Eichenbaum and Evans (2005), whose models encompass additional nominal and real rigidities, such as consumption habit, capital depreciation, investment adjustment costs, price indexation, and sticky wages.…”

Section: Introductionmentioning

confidence: 99%

“…Additionally, a simple model environment and stochastic structure facilitates estimation for short samples. As opposed to Ireland (2004) and An and Schorfheide (2007), we explicitly include the consumption habit in the households utility function. Additionally, we consider Calvo's (1983) mechanism for staggered price setting in a monopolistic environment instead of the ad-hoc price adjustment costs function as in Rotemberg (1992).…”

Section: Introductionmentioning

confidence: 99%

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A small New Keynesian model to analyze business cycle dynamics in Poland and Romania

Nalban

2015

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In this paper, we derive a small textbook New Keynesian DSGE model to evaluate Polish and Romanian business cycles during the 2003-2014 period. Given the similarities between the two economies, we use an identical calibration procedure for certain coefficients and marginal prior distributions for the others, rendering the resulting cross-country differences as primarily data-driven. The estimated structural coefficients for the two countries have comparable values, implying similar qualitative macroeconomic transmission mechanisms. However, the Romanian shocks display much more variability, and the impulse response functions have similar shapes but deeper trajectories. The model-simulated theoretical moments for the output growth, the inflation rate and the nominal interest rate (means, standard deviations and cross-correlations) are close to their actual data counterparts, demonstrating the models' ability to match and replicate statistical properties of the observed variables. Shock decompositions of the output and the inflation rate revealed the driving forces of the business cycles; demand shocks explain much of the GDP growth dynamics (persistent positive contributions before the crisis and negative thereafter), whereas prices were also driven by supply and monetary policy shocks, the latter being more important for Poland. Introduction

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“…The foreign economy is approximated by a VAR(2). Different model specifications are estimated using Bayesian estimation techniques as exposed in An and Schorfheide (2007).…”

Section: Introductionmentioning

confidence: 99%

Driving forces of the Swiss output gap

Leist

2013

Swiss J Economics Statistics

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Summary What drives the output gap? Contrary to standard agnostic statistical approaches, New Keynesian small open economy models allow decomposing the output gap into its shocks and confirm the conventional wisdom that most of the variation is due to foreign shocks. However, the risk premium shock also plays an important role. It has a procyclical effect on the output gap except for the most recent recession, where the economic agents demanded a higher risk premium probably due to the large Swiss financial sector. This helped to dampen the recession because of the depreciation of the domestic currency due to this shock.

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Bayesian Analysis of DSGE Models

Cited by 556 publications

References 122 publications

Money and monetary policy in Israel during the last decade

Money and monetary policy in Israel during the last decade

A small New Keynesian model to analyze business cycle dynamics in Poland and Romania

Driving forces of the Swiss output gap

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