Publication details
Nonlinear DSGE model of a small open economy with time-varying parameters: Czech economy in a period of recession
| Authors | |
|---|---|
| Year of publication | 2014 |
| Type | Article in Proceedings |
| Conference | Proceedings of the 32nd International Conference Mathematical Methods in Economics |
| MU Faculty or unit | |
| Citation | |
| Web | conference proceedings |
| Field | Economy |
| Keywords | DSGE model; Great Recession; deep parameters; time-varying parameters; nonlinear particle filter; unscented particle filter |
| Description | In this paper, we study the changes in the structure and behaviour of the Czech economy in a period of the Great Recession and subsequent return to the long-run equilibrium. This small 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 goas to identify the most important changes in behaviour and underlying structure of the Czech economy. In order to distinguish the country specific changes from Europe-wide trends we also compare the time-varying estimates of the Czech economy and the euro area. We focus on the subset of parameters that are generally considered deep, i.e. time-invariant. Changes of these parameters during the period of global recession would imply that the structure of the economy together with its behaviour changed as a consequence of the recession. |
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