Title: An estimated stochastic dynamic general equilibrium model of the euro area
Authors: Smets, Frank ×
Wouters, R. #
Issue Date: 2003
Publisher: Published by the MIT Press for the European Economic Association
Series Title: Journal of the European Economic Association vol:1 issue:5 pages:1123-1175
Abstract: This paper develops and estimates a dynamic stochastic general equilibrium (DSGE) model with sticky prices and wages for the euro area. The model incorporates various other features such as habit formation, costs of adjustment in capital accumulation and variable capacity utilization. It is estimated with Bayesian techniques using seven key macroeconomic vari-ables: GDP, consumption, investment, prices, real wages, employment, and the nominal interest rate. The introduction of ten orthogonal structural shocks (including productivity, labor supply, investment, preference, cost-push, and monetary policy shocks) allows for an empirical investigation of the effects of such shocks and of their contribution to business cycle fluctuations in the euro area. Using the estimated model, we also analyze the output (real interest rate) gap, defined as the difference between the actual and model-based potential output (real interest rate).
ISSN: 1542-4766
Publication status: published
KU Leuven publication type: IT
Appears in Collections:Non-KU Leuven Association publications
× corresponding author
# (joint) last author

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