Testing for Parameter Stability in DSGE Models. The Cases of France, Germany and Spain

We estimate a New Keynesian DSGE model on French, German and Spanish data. The main aim of this paper is to check for the respective sets of parameters that are stable over time, making use of the ESS procedure ( ”Estimate of Set of Stable parameters“) developed by Inoue and Rossi (2011). This new econometric technique allows to address the stability properties of each single parameter in a DSGE model separately. In the case of France and Germany our results point to structural breaks after the beginning of the second stage of EMU in the mid-nineties, while the estimates for Spain show a significant break just before the start of the third stage in 1998. Specifically, there are significant changes in monetary policy behavior for France and Spain, while monetary policy in Germany seems to be stable over time.DSGE; EMU; Monetary Policy; Structural Breaks

Testing for Parameter Stability in DSGE Models. The Cases of France, Germany and Spain

We estimate a New Keynesian DSGE model on French, German and Spanish data. The main aim of this paper is to check for the respective sets of parameters that are stable over time, making use of the ESS procedure (”Estimate of Set of Stable parameters“) developed by Inoue and Rossi (2011). This new econometric technique allows to address the stability properties of each single parameter in a DSGE model separately. In the case of France and Germany our results point to structural breaks after the beginning of the second stage of EMU in the mid-nineties, while the estimates for Spain show a significant break just before the start of the third stage in 1998. Specifically, there are significant changes in monetary policy behavior for France and Spain, while monetary policy in Germany seems to be stable over time.DSGE, monetary policy, EMU, structural breaks

Testing for Parameter Stability in DSGE Models. The Cases of France, Germany and Spain

We estimate a New Keynesian DSGE model on French, German and Spanish data. The main aim of this paper is to check for the respective sets of parameters that are stable over time, making use of the ESS procedure ( ”Estimate of Set of Stable parameters“) developed by Inoue and Rossi (2011). This new econometric technique allows to address the stability properties of each single parameter in a DSGE model separately. In the case of France and Germany our results point to structural breaks after the beginning of the second stage of EMU in the mid-nineties, while the estimates for Spain show a significant break just before the start of the third stage in 1998. Specifically, there are significant changes in monetary policy behavior for France and Spain, while monetary policy in Germany seems to be stable over time

New Keynesian DSGE models: theory, empirical implementation, and specification

The core of the dissertation consists of three chapters. Chapter 2 provides a graphical and formal representation of a basic dynamic stochastic general equilibrium (DSGE) economy and discusses the prerequisites needed for an empirical implementation. The aim of this chapter is to present the core features of the models used in chapter 3 and 4 of this work and to introduce the estimation techniques employed in the remainder of the thesis. In chapter 3 we estimate a New Keynesian DSGE model on French, German, Italian, and Spanish data to check for the respective sets of parameters that are stable over time, implementing the ESS procedure (“Estimate of Set of Stable parameters”) developed by Inoue and Rossi (2011). This econometric technique allows to identify the respective parameters of a DSGE model that have changed at an unknown break date. In the case of France, Germany, and Italy our results point to structural breaks after the beginning of the second stage of EMU in the mid-1990s, while the estimates for Spain show a significant break just before the start of the third stage in 1998. Specifically, we find significant changes in monetary policy behavior for France, Italy, and Spain, while we detect monetary policy to be stable over time in Germany. The incorporation of convex adjustment costs of capital accumulation into dynamic stochastic general equilibrium models has become standard practice in the literature, since these frictions improve the ability of sticky-price models with endogenous investment to match the key features of the data considerably. In chapter 4, we use a Bayesian approach to investigate empirically how different ad-hoc specifications of adjustment costs affect the fit and the dynamics of a New Keynesian dynamic stochastic general equilibrium model with real and nominal frictions featuring several exogenous stochastic disturbances. We consider three different forms of quadratic adjustment costs: an investment adjustment cost specification and two versions of capital adjustment costs. Using both euro area and US data, we detect in part marked differences between the estimated structural parameters across the three model specifications. Further, the implementation of either investment or capital adjustment costs affects the empirical fit and the dynamics of the respective model specifications substantially. Concerning the overall empirical fit, the model specifications with capital adjustment costs outperform the model version featuring investment adjustment costs, although only the latter is able to produce data-consistent hump-shaped investment dynamics in response to exogenous shocks

The Macroeconomic Consequences of EMU: International Evidence from a DSGE Model

In this paper, we estimate a New Keynesian DSGE model developed by Ireland (2003) on French, German and Spanish data with the aim to explore the macroeconomic consequences of EMU. In order to validate the results from the DSGE model, we amend this analysis by stability tests of monetary policy reaction functions for these countries. We find that (a) the DSGE structure is well suited for the characterization of key macroeconomic features of the three economies; (b) significant efficiency gains were realized in terms of lower adjustment cost of prices and the capital stock; (c) the behavior of monetary policy did not change in Germany, unlike in France and Spain. Specifically, the impact of inflation on interest rates increased considerably in the two latter countries

A Service of zbw Leibniz-Informationszentrum Wirtschaft Leibniz Information Centre for Economics The Macroeconomic Consequences of EMU: International Evidence from a DSGE Model

Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may Abstract In this paper, we estimate a New Keynesian DSGE model developed by Ireland Specifically, the impact of inflation on interest rates increased considerably in the two latter countries

Testing for Parameter Stability in DSGE Models. The Cases of France, Germany and Spain

We estimate a New Keynesian DSGE model on French, German and Spanish data. The main aim of this paper is to check for the respective sets of parameters that are stable over time, making use of the ESS procedure ( ”Estimate of Set of Stable parameters“) developed by Inoue and Rossi (2011). This new econometric technique allows to address the stability properties of each single parameter in a DSGE model separately. In the case of France and Germany our results point to structural breaks after the beginning of the second stage of EMU in the mid-nineties, while the estimates for Spain show a significant break just before the start of the third stage in 1998. Specifically, there are significant changes in monetary policy behavior for France and Spain, while monetary policy in Germany seems to be stable over time

The Macroeconomic Consequences of EMU: International Evidence from a DSGE Model

In this paper, we estimate a New Keynesian DSGE model developed by Ireland (2003) on French, German and Spanish data with the aim to explore the macroeconomic consequences of EMU. In order to validate the results from the DSGE model, we amend this analysis by stability tests of monetary policy reaction functions for these countries. We find that (a) the DSGE structure is well suited for the characterization of key macroeconomic features of the three economies; (b) significant efficiency gains were realized in terms of lower adjustment cost of prices and the capital stock; (c) the behavior of monetary policy did not change in Germany, unlike in France and Spain. Specifically, the impact of inflation on interest rates increased considerably in the two latter countries.DSGE; Monetary Policy; EMU