A Partial Dynamic Stochastic General Equilibrium Model of the Czech Economy

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Authors

MUSIL Karel VAŠÍČEK Osvald

Year of publication 2007
Type Article in Proceedings
Conference Mathematical Methods in Economics 2007
MU Faculty or unit

Faculty of Economics and Administration

Citation
Field Economy
Keywords New Keynesian DSGE model; partial model of the Czech economy; monetary policy; Taylor rule; inflation targeting; rational expectations; Bayesian estimation
Description The paper introduces a partial New Keynesian Dynamic Stochastic General Equilibrium (NK DSGE) model of the Czech economy. It is a closed economy model based on microeconomic foundations. The model consists of four representative agents. These are households (optimizing behavior contains habit formation in consumption), firms (forming a New Keynesian Phillips Curve as a result of Calvo style price policy), central bank (implementing monetary policy in accordance with a modified Taylor rule), and government (as an exogenous sector). For the estimation of the log linearized model is employed a Bayesian estimation technique. Estimated parameters are analyzed in a form of a description of their values and impulse response functions of a monetary policy shock. The model can be extended to a form of a two economy model (open economy model with endogenous foreign sector).
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