Kamal, Mona (2011): Bayesian Estimation of Dynamic Stochastic General Equilibrium Model Using UK Data.
Download (320kB) | Preview
This paper applies the Bayesian method to estimate a Dynamic Stochastic General Equilibrium (DSGE) model using quarterly data for the UK over the period from 1971:Q1 through 2009:Q2. The contribution of the paper is two-fold. First, we estimate a model characterised by nominal and real frictions. This estimation allows us to recover the structural parameters of the economy and study the transmission mechanism of a government spending shock. Second, we investigate how the inclusion of fiscal policy rules affect the propagation of shocks and the ability of the model to fit the data. We establish that this inclusion enable the model to fit the data more closely. In addition, it has an impact on the qualitative responses of macroeconomic variables to the government spending shock.
|Item Type:||MPRA Paper|
|Original Title:||Bayesian Estimation of Dynamic Stochastic General Equilibrium Model Using UK Data|
|Keywords:||The transmission mechanism of a government spending shock, Bayesian analysis,(DSGE)model.|
|Subjects:||C - Mathematical and Quantitative Methods > C8 - Data Collection and Data Estimation Methodology; Computer Programs > C83 - Survey Methods; Sampling Methods
C - Mathematical and Quantitative Methods > C0 - General > C01 - Econometrics
E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E60 - General
|Depositing User:||Mona Kamal|
|Date Deposited:||20. Feb 2011 20:21|
|Last Modified:||19. Feb 2013 17:05|
Adolfson, Malin , Laséen, Stefan , Lindé, Jesper , Villani, Mattias, (2007), Bayesian Estimation of an Open Economy DSGE Model with Incomplete Pass-Through, Journal of International Economics, Vol. 72(2), pp. 481-511, July.
Adolfson, Malin , Laséen, Stefan , Lindé, Jesper , Villani, Mattias, (2005), Are Constant Interest Rate Forecasts Modest Interventions? Evidence from an Estimated Open Economy DSGE Model of the Euro Area, Working Paper Series No. 180, Sveriges Riksbank (Central Bank of Sweden).
Afonso, António and Sousa M. Ricardo (2009), The Macroeconomic Effects of Fiscal Policy, The European Central Bank, working paper series No. 991, January.
Aiyagari, S. Rao, and Christiano, Lawrence J. and Eichenbaum, Martin, (1992), The Output, Employment, and Interest Rate Effects Of Government Consumption, Journal of Monetary Economics, Vol. 30(1), pp. 73-86, October.
Almeida, Vanda, (2009), Bayesian Estimation of a DSGE Model for the Portuguese Economy, Economic Research Department, Banco de Portugal, Working Papers No. 14, July.
Botman, D., D. Muir, D. Laxton and A. Romanov (2006), A New-Open-Economy-Macro Model for Fiscal Policy Evaluation, IMF Working Paper 06/045.
Burriel , Pablo and Fernandez-Villaverde, Jesus and Rubio-Ramirez, Juan F., (2009), MEDEA: a DSGE Model for the Spanish Economy, PIER Working Paper Archive 09-017, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
Calvo, G., A., (1983), Staggered Prices in a Utility-Maximising Framework, Journal of Monetary Economics, Vol. 12, pp. 383-98.
Chari V. V., Kehoe, Patrick J. and Ellen R. McGrattan, (2009), New Keynesian Models: Not Yet Useful for Policy Analysis, American Economic Journal: Macroeconomics, American Economic Association, Vol. 1(1), pp. 242-66, January.
Christiano, Lawrence, Martin Eichenbaum and Charlie Evans, (2005), Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy, Journal of Political Economy, Vol. 113(1), pp. 1-45.
Christopher J. Erceg , Luca Guerrieri , Christopher Gust, (2006), SIGMA: a New Open Economy Model for Policy Analysis, International Journal of Central Banking, Vol. 2(1), March.
Dejong N., David and Dave, Cheatan, (2007), Structural Macroeconomics, Princeton University Press.
Del Negro, M., F. Schorfheide, F. Smets, and R. Wouters (2007), On the Fit of New Keynesian Models, Journal of Business and Economic Statistics, Vol. 25(2), pp. 143-162.
Del Negro, M., and F. Schorfheide (2004), Priors from General Equilibrium Models for VARs, International Economic Review, 45(2), pp. 643-673.
DiCecio, Riccardo and Nelson, Edward (2007), An Estimated DSGE Model for the United Kingdom, Research Division, Federal Reserve Bank of St. Louis, Working Paper Series, 2007- 006A, February.
Ellison, Martin and Scott, Andrew (2000), Sticky Prices and volatile output, Bank of England,Working Papers Series No. 127.
Erceg, Christopher J., Henderson, Dale W., Levin, Andrew T., (2000), Optimal Monetary Policy With Staggered Wage and Price Contracts, Journal of Monetary Economics, Vol. 46(2), pp. 281-313, October.
Faccini, Renato, Millard, Stephen and Zanetti, Francesco, (2009), Wage Rigidities in an Estimated DSGE Model of the UK Labour Market, The Bank of England’s research paper series.
Galí , J. and T. Monacelli (2005), Monetary Policy and Exchange Rate Volatility in a Small Open Economy, Review of Economic Studies, Vol. 72(252),July, pp. 707-734.
Garratt, Anthony, Lee, Kevin, Pesaran M. Hashem, Shin, Yongcheol, (2006), Global and National Macroeconometric Modelling: a Long-Run Structural Approach, Oxford University Press Inc., New York.
Geweke, J. (1999), Using Simulation Methods for Bayesian Econometric Models: Inference, Development and Communication, Econometric Review, Vol. 18(1), pp. 1-126.
Griffoli, Mancini, Tommaso (2009), An introduction to the solution and estimation of DSGE models, Dynare Version 4 - User Guide, November.
Harrison, Richard, Kalin Nikolov, Meghan Quinn, Gareth Ramsay, Alasdair Scott, and Ryland Thomas, (2005), The Bank of England Quarterly Model, Bank of England Publications, London.
Harrison, Richard and Oomen, Özlem, (2010), Evaluating and estimating a DSGE model for the United Kingdom,The Bank of England’s working paper series, Working Paper No. 380.
Jesús Fernández-Villaverde, (2009), The Econometrics of DSGE Models, NBER Working Paper No. 14677, January.
Kamal, Mona (2010), Empirical Investigation of Fiscal Policy Shocks in the UK, Empirical Economic Letters, Vol. 9(4), April.
Kim, K. and A. R. Pagan (1995), The Econometric Analysis of Calibrated Macroeconomic Models, Chapter 7 in M. H. Pesaran and M. Wickens (eds.), Handbook of Applied Econometrics: Macroeconomics. Basil Blackwell: Oxford.
Kydland, F. E. and Prescott, E. C. (1982), Time to build and aggregate fluctuations,Econometrica, vol. 50(6), November, pp. 1345-70.
Lubik, Thomas and Schorfheide, Frank (2005), A Bayesian Look at New Open Economy Macroeconomics, Chapter in NBER book, NBER Macroeconomics Annual 2005, Vol. 20, editors: Mark Gertler and Kenneth Rogoff, pp. 313-382, April.
Lubik and Schorfheide (2007), Do central banks respond to exchange rate movements? A structural investigation, Journal of Monetary Economics, Vol. 54, pp. 1069-1087.
Monacelli, Tommaso and Perotti, Roberto (2006), Fiscal policy, the Trade Balance and the Real Exchange Rate: Implications for International Risk Sharing, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University, June.
Mountford, Andrew and Uhlig, Harald (2009), What Are the Effects of Fiscal Policy Shocks?, Journal of Applied Econometrics, Vol. 24(6), pp. 960-992, September .
Pytlarczyk , Ernest (2005),An Estimated DSGE Model for the German Economy within the Euro Area, Deutsche Bundesbank, Discussion Paper Series, No. 33/2005.
Ravn, Morten, Schmitt-Grohe, Stephanie, Uribe, Martin (2007), Explaining the Effects of Government Spending Shocks on Consumption and the Real Exchange Rate, National Bureau of Economic Research, Working Paper No. 13328, August.
Ravenna, F. (2007), Vector Autoregression and Reduced Form Representations of DSGE Models, Journal of Monetary Economics, Vol. 54(7), pp. 2048-2064.
Ruge-Murcia, F. J. (2007), Methods to Estimate Dynamic Stochastic General Equilibrium Models, Journal of Economic Dynamics and Control, Vol. 31, pp. 2599-2636.
Schmitt-Groh´e, S. and M. Uribe (2000), Price Level Determinacy and Monetary Policy under a Balanced-Budget Requirement, Journal of Monetary Economics, Vol. 45, pp. 211-246.
Schmitt-Groh´e, S. and M. Uribe (2004), Optimal Simple and Implementable Monetary and Fiscal Rules, Journal of Monetary Economics, Vol. 54, pp. 1702-1725.
Smets, Frank and Raf Wouters (2003), An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area, Journal of the European Economic Association, September, Vol. 1(5), pp. 1123-1175.
Smets, Frank and Wouters, Raf (2007), Shocks and Frictions in US Business Cycles: a Bayesian DSGE Approach, American Economic Review, Vol. 97(3), pp. 586-606.
Available Versions of this Item
- Bayesian Estimation of Dynamic Stochastic General Equilibrium Model Using UK Data. (deposited 20. Feb 2011 20:21) [Currently Displayed]