The Czech Economy with Inflation Targeting Represented by DSGE Model: Analysis of Behaviour
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| Year of publication | 2005 |
| MU Faculty or unit | |
| Citation | |
| Description | The working paper is aimed to the behaviour analysis of the Czech economy with inflation targeting regime represented by a New Keynesian dynamic stochastic general equilibrium model (DSGE) consistently based on theoretical microeconomic foundations. The model is created by the relations of finished goods producing and intermediate goods producing firms, representative households and a central bank. Monetary policy of the central bank is represented by the generalized Taylor rule. The working paper contains the method for solving a linearized model containing rational expectations. The Kalman filter with maximum likelihood is introduced for an estimation of the solved model. The Kalman smoother is used for an estimation of the smoothed inflation target, which is an unobserved state. The model seems to give very satisfactory approximation of the Czech economy behaviour. The final part of the working paper is devoted to the analysis of behaviour based on simulated model responses. |
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