Slovak Economy in a Period of Recession: Nonlinear DSGE Model with Time-varying Parameters


TVRZ Stanislav VAŠÍČEK Osvald

Year of publication 2015
Type Article in Periodical
Magazine / Source Ekonomický časopis
MU Faculty or unit

Faculty of Economics and Administration

Web obsah časopisu, roč. 63, číslo 1
Field Economy
Keywords nonlinear DSGE model; Great Recession; monetary union; time-varying parameters; nonlinear particle filter; second order approximation
Description In this paper, we study the dramatic changes in the structure and behaviour of the Slovak economy in a period of the accession to the Euro area and the Great Recession and subsequent return to the long-run growth equilibrium. This small and very open economy is represented by nonlinear dynamic stochastic model of a general equilibrium with financial accelerator. The development of time-varying structural parameters is identified using the second order approximation of a nonlinear DSGE model. The model is estimated with the use of nonlinear particle filter. Analogous model was estimated for the economy of the Euro area. It is our goal to identify the most important changes in behaviour and underlying structure of the Slovak economy. In order to distinguish the country specific changes from broader Europe-wide trends we also compare the time-varying estimates of the Slovak economy and the Euro area.
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