Parameter Drifting in a DSGE Model Estimated on Czech Data



Year of publication 2011
Type Article in Periodical
Magazine / Source Finance a úvěr - Czech Journal of Economics and Finance
MU Faculty or unit

Faculty of Economics and Administration

Field Economy
Keywords DSGE models; time-varying parameters; Kalman filter
Description In this article, the authors investigate the possible time-varying structure of DSGE models. They follow the study of Andrle et al. (2009), which argues that models designed for monetary policy analysis and forecasting of an economy that is undergoing structural changes must include exogenous processes (technologies) capturing the specific characteristics of individual sectors. The authors conclude that the presence of structural changes and the convergence process in the data imply drifting of structural parameters in the model without technologies. Incorporating technologies causes the structural parameters to be relatively stable. From the perspective of monetary policy analysis and forecasting, it seems more convenient to assume that the structural parameters are stable and use sectoral technologies owing to their aggregate form.
Related projects:

You are running an old browser version. We recommend updating your browser to its latest version.