A Small New Keynesian Model of Slovakia

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Authors

CIGÁŇOVÁ Veronika VAŠÍČEK Osvald

Year of publication 2009
Type Article in Proceedings
Conference Mathematical Methods in Economics 2009
MU Faculty or unit

Faculty of Economics and Administration

Citation
Field Economy
Keywords NK DSGE model; nominal rigidity; real rigidity; small open economy; Slovakia
Description This paper deals with a small open economy New Keynesian Dynamic Stochastic General Equilibrium (NK DSGE) model and its ability to describe behaviour of the Slovak economy. The model framework consists of three home subjects: households, firms and a monetary authority. The representative household maximizes its utility function which contains a real rigidity in consumption in a form of a habit formation. The monopolistic competitive firms maximize their net present value of dividends (their profits) with respect to Calvo-type price setting. The sticky price setting of home producers and importers represents nominal rigidities in the model. Monetary policy is conducted according to a Taylor-type rule. The model includes exogenous foreign sector which is represented by Euroarea-12. Evaluation of the model for Slovakia is based on an analysis of impulse response functions and an assessment of estimated parameters. We compare consistency of our results with similar studies.
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