Bayesian Estimation of an Open Economy DSGE Model with Incomplete Pass-Through

Riksbank Research Paper Series No. 18

Sveriges Riksbank Working Paper Series No. 179

82 Pages Posted: 19 Oct 2006

See all articles by Malin Adolfson

Malin Adolfson

Sveriges Riksbank

Stefan Laseen

Sveriges Riksbank - Monetary Policy Department

Jesper Lindé

Sveriges Riksbank - Research Division

Mattias Villani

Sveriges Riksbank - Research Division; Stockholm University - Department of Statistics

Date Written: October 19, 2006

Abstract

In this paper we develop a dynamic stochastic general equilibrium (DSGE) model for an open economy, and estimate it on Euro area data using Bayesian estimation techniques. The model incorporates several open economy features, as well as a number of nominal and real frictions that have proven to be important for the empirical fit of closed economy models. The paper offers: i) a theoretical development of the standard DSGE model into an open economy setting, ii) Bayesian estimation of the model, including assesments of the relative importance of various shocks and frictions for explaining the dynamic development of an open economy, and iii) an evaluation of the model's empirical properties using standard validation methods.

Keywords: DSGE model, Open economy, Monetary Policy, Bayesian Inference, Business cycle

JEL Classification: E40, E47, E52, C11

Suggested Citation

Adolfson, Malin and Laseen, Stefan and Linde, Jesper and Villani, Mattias, Bayesian Estimation of an Open Economy DSGE Model with Incomplete Pass-Through (October 19, 2006). Riksbank Research Paper Series No. 18; Sveriges Riksbank Working Paper Series No. 179. Available at SSRN: https://ssrn.com/abstract=938699 or http://dx.doi.org/10.2139/ssrn.938699

Malin Adolfson (Contact Author)

Sveriges Riksbank ( email )

Brunkebergstorg 11
103 37 Stockholm
Sweden

Stefan Laseen

Sveriges Riksbank - Monetary Policy Department ( email )

S-103 37 Stockholm
Sweden

Jesper Linde

Sveriges Riksbank - Research Division ( email )

S-103 37 Stockholm
Sweden
+46 8 787 0873 (Phone)

HOME PAGE: http://www.riksbank.com

Mattias Villani

Sveriges Riksbank - Research Division ( email )

S-103 37 Stockholm
Sweden

HOME PAGE: http://www.riksbank.com/research/villani

Stockholm University - Department of Statistics ( email )

Universitetsvägen 10
Stockholm, Stockholm SE-106 91
Sweden

HOME PAGE: http://www.riksbank.com/research/villani

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