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Zero lower bound on interest rate: application of DSGE model on Czech economy and
web appendix
Paper explores impacts of zero lower bound of interest rate on behaviour of macroeconomic variables in the Czech economy. The analysis uses DSGE model of small open economy, concretely model from Justiniano and Preston (2004), and toolkit from Guerrieri and Iacoviello (2013) that is able to solve occasionally binding constraint. The model is estimated on data of Czech economy covering period 1996:Q2 -- 2013:Q4.Situation when central bank is incapable to decrease (nominal) interest rate because of zero lower bound has implications for behaviour of output and consumption but not inflation. The most distinct shocks that cause binding of interest rate for most periods are domestic cost-push shock and foreign preference shock. These two shocks also have non-negligible welfare implications regarding behaviour of consumption. In reaction to three standard deviations of innovations, the drop of consumption was larger by 0.9 and 0.5 percentage points, respectively, when the interest rate hit the zero lower bound.
MME 2014, Olomouc
Uuuups! There was a mistake in the Matlab code for simulations (for behaviour of inflation).
Here
is the correct version of figures 1 and 2.
DSGE model with housing sector: application to the Czech economy and
web appendix
Bayesian estimation of multi-sector DSGE model (taken from Iacoviello and Neri (2010)) on Czech data.
Model contains two production sectors: consumption/investment goods sector and housing sector with different technological trends.
Next, there is financial friction in the form of collateral constraint which affects borrowing capacity and consumer spending.
Results show that monetary policy has more pronounced effect on consumption and output when houses are better collateralizable.
Consumption shocks, housing technology and housing preference shocks played important role in fluctuation of the real
variables while inflation target shocks and cost-push shocks influenced mostly nominal variables. Recent boom and bust in housing prices was caused primary by
housing preference shocks (demand side shocks). Supply shocks were also significant but to much less extent.
MME 2013, Jihlava
DSGE model with collateral constraint: estimation on Czech data
Estimation of model with collateral effect where houses serve as collateral for credit constrained households. Parameters are economically interpreted and ability of the model to match moments in data is assessed. Situation when houses are not collateralizable is examined. It shows that the collateral effect is necessary feature of the model to deliver positive reaction of consumption to house price shock as in the data.
MME 2012, Karvina
Financial accelerator in estimated model: application to the Czech economy
Estimation of New Keynesian DSGE model with financial accelerato using Bayesian methods on data of Czech economy. The models with and without financial accelerator are assessed how they fit the data using statistical moments and Bayesian factor. This exercise shows surprising result that the model without financial accelerator performs on data much better than model with it.
MME 2011, Janska Dolina, SK
Measuring output gap using New Keynesian model: application to the Czech economy
Estimation of output gap in the Czech economy using New Keynesian model. Data for unemployment and labor share together with calibrated values of structural parameters are used. The output gap is compared to traditional measure -- detrended GDP. The main difference is that New Keynesian output gap is negative in the whole analyzed period which means that economy is operating under potential. Most of the variations of the output gap stems from labor market. Sensitivity analysis with respect to structural parameters is carried out and some implications for welfare are discussed.
MME 2010, Ceske Budejovice
New goods margin in international trade: empirical analysis for Visegrad countries Empirical analysis of international trade between Visegrad countries and EU-15 during past two decades. The goal of the paper is to find out if the growth in export is of intensive or extensive type. I follow methodology of Kehoe and Ruhl (2002) and use detailed trade statistics on the value of trade flows by commodity according to Standard International Trade Classification (SITC) codes. I find out that the goods that were traded the least in the benchmark year account for disproportionate share in trade after liberalization and reduction of trade barriers. The most significant increase was found for Poland and the Czech Republic. The set of goods which accounted for only ten percent of trade in 1993 accounts for nearly thirty percent of trade following the liberalization. Similar patterns were identified also for Hungary and Slovakia even it the analyzed period was shorter. The countries thus began to export goods that they had not been previously trading.
Challenges for Analysis of the Economy, the Businesses, and Social Progress, Szeged, 2010
Extensive margin in international trade: empirical analysis for Visegrad countries Empirical analysis of international trade between Visegrad countries and EU-15. The goal is to find out if the growth in export is of intensive or extensive type. I use methodology of Kehoe and Ruhl (2002) -- detailed trade statistics on the value of trade flows by commodity according to Standard International Trade Classification (SITC) codes. The goods that were traded the least in the benchmark year account for disproportionate share in trade after liberalization and reduction of trade barriers. The most significant increase was found in Hungary. The set of goods which accounted for only ten percent of trade in 1993 accounts for about forty percent of trade following the liberalization. Similar patterns were identified also in other Visegrad countries. The countries thus began to export goods that they had not been previously trading. This is growth on the extensive margin and it should be reflected in models of international trade.
MME 2009, Kostelec nad Cernymi Lesy
WARNING! The analysis for Hungary is wrong :( There were some methodological changes in data in 1997.(That is the reason for sudden change in time series.) Revised version will come in next paper.
Nominal rigidities and wage-price dynamics in estimated DSGE model: application for the Czech economy The goal of this paper is to examine importance of nominal rigidities . especially of wages and prices . in the Czech economy. As a tool, DSGE model of open economy with nominal rigidities is used. The model is estimated on data of the Czech economy using Bayesian techniques. The model is evaluated in terms how it fits the data and the dynamical properties of the model are studied. The emphasis is put on wage-price dynamics. Next, the relative importance of nominal rigidities is examined using sensitivity analysis. The conclusion is that wages are more rigid than prices and thus wage rigidity and price rigidity are interchangeable. This outcome should be taken into consideration for forming of monetary policy by the central bank and modelling of behaviour of the Czech economy.
WP CVKS (2008)
DSGE model with nominal rigidities: estimation and assessing of fit
DSGE model of open economy with nominal rigidities; model estimated using Bayesian techniques on data of Czech economy; estimated values of structural parameters are economically interpreted; assessing of model fit to data is carried out along three dimensions.
(i) the fitted series are compared with observed series, (ii) the volatility and the autocorrelations implied by the model are compared with the statistics calculated from the data (iii) estimated unobserved shocks give picture of important events in the Czech economy.
Bulletin of the Czech Econometric Society (2008)
Sensitivity analysis of DSGE model of open economy with nominal rigidities Comparison of different competing models, how they fit the data; the benchmark: four types of nominal rigidities (Calvo price setting); competing models: flexibility in some sectors; measure of fit: marginal likelihood from Bayesian estimation; the most importatnt frictions in import prices and wages, sticky wages more important than sticky prices; the most sensitive parameters are Frisch elasticity of labor supply and openness of the economy; measurement errors have negligible effect on the results.
MME 2008, Liberec
Growth Accounting for Visegrad States: Dual Approach Calculation of TFP growth rates for Visegrad states using dual approach to growth accounting, comparison of the results. Economic growth has different sources. TFP and technology is the main cause of growth in the Czech Republic, factor accumulation plays very important role in Poland and Slovakia. Hungary is country where the sources of growth are evenly divided. Working Paper CVKS, 2007
Dual approach to growth accounting -application for
the Czech Republic Comparison of results from primal and dual approach to growth accounting for case of the Czech Republic (dual approach based on factor prices rather than quantities). Calculation of total factor productivity growth rate - similar results for both approaches. TFP growth accounts for seventy seven per cent of the growth rate of total output. MME 2007, Ostrava
Business Cycle in the Czech Republic - The Battle of Theories Some stylized facts about Czech business cycle (cross-correlations between cyclical component of selected variables and cyclical component of real GDP), confronted with implications of three competing theories, Real Business Cycle theory as the best theory explaining business cycle in the Czech Republic. Ceska ekonomika v procesu globalizace, Brno, 2006
Czech Business Cycle Stylized Facts Identifcation of stylized facts of Czech business cycle, decomposition of time series into trend and cyclical component using
bandpass filter, cross-correlations between cyclical component of GDP and various time series, determination of cyclical behaviour of the series (leading and lagging indicators), Granger causality between GDP and other aggregate variables, summary of behaviour of variables over the cycle, implications of alternative economic theories, distinctions between stylized facts in the Czech Republic and other developed countries.
Working Paper CVKS, 2006
Growth Accounting - Application for Visegrad States Growth accounting applied to Visegrad States, theoretical derivation, estimation of Solow residual (capital & technology progress), comparison, limitations of theory. Trendy hospodarskeho a socialneho rozvoja v krajinach EU 2005, Trencin.
Quantitative analysis of economy model using method of moments Calibration of closed economy model on US data using General Method of Moments (GMM), filtration (Hodrick-Prescott filter), historical standard deviations and autocorrelations, conversion of model into reduced form of VAR, model moments, setting of parameters, impulse responses to shocks. MME 2005, Hradec Kralove.
Wage and price Phillips curve Derivation of wage and price Phillips curves from micro foundations (monopolistic competition, nominal rigidities), first order conditions, log-linearization, impulse responses to shocks (change in preferences, technology shock). MME 2004, Brno.
Model of closed economy with rational expectations Solving of rational expectations models using Schur decomposition (Blanchard-Kahn condition, stable and unstable part), examples with expected and unexpected demand shock and different types of Phillips curve. MME 2003, Praha.