Fiscal policy in an estimated open-economy model for the Euro area

This paper uses an estimated DSGE model for the euro area to study the effects of fiscal stabilisation policies. There are at least two features of the euro area economy which makes this analysis interesting. First, there are nominal rigidities in goods and labour markets, and there are financial market frictions with a significant share of liquidity constrained households. Second, the government is a major sector of the euro area economy. In this paper we look at fiscal stabilisation via government consumption, investment, transfers and wage taxes. Empirical evidence is found for systematic countercyclical fiscal policy. Consistent with previous findings, there is a small positive fiscal multiplier in the case of transitory fiscal shocks. It is found that fiscal policy is effective in stabilising GDP in the presence of demand and supply shocks. Fiscal policy helps to reduce the demand externality arising from nominal rigidities. In addition automatic stabilisation via government transfers helps to smooth consumption of liquidity constrained household. Fiscal policy partly compensates the financial market distortion. With distorted goods, labour and financial markets it is found that the estimated fiscal policy rules reduce fluctuations in euro area GDP by about 14 percent.DSGE modelling, fiscal policy, stabilisation policies, euro area, Ratto, Roeger, in't Veld

European Community project MONFISPOL (grant agreement SSH-CT-2009-225149) : Deliverable 3.1.2 Algorithms for identification analysis under the DYNARE environment: final version of software

In this report we document in detail the Identification package developed for the DYNARE environment. The package implements methodologies and collects developed algorithms to assess identification of DSGE models in the entire prior space of model deep parameters, by combining `classical' local identification methodologies and global tools for model analysis, like global sensitivity analysis.JRC.G.3-Econometrics and applied statistic

Using a DSGE model to look at the recent boom-bust cycle in the US

This paper presents a DSGE model with residential investment and credit-constrained households estimated with US data over the period 1980Q1-2008Q4. In order to better understand speculative movements of house prices, we model land as an exhaustible resource, implying that house prices have asset market characteristics.We conduct an event study for the US over the period 1999Q1-2008Q4 which has been characterised by a housing boom and bust and examine which shocks have contributed to the evolution of GDP and its components over this period. We devote special attention to the contribution of non-fundamental shocks to asset prices over this episode.Using a DSGE model to look at the recent boom-bu,DSGE model,Housing,Credit constraint,collateral,Bubbles,Shocks,Ratto,Roeger,in 't Veld,European Economy. Economic Papers

A comparison of structural reform scenarios across the EU member states - Simulation-based analysis using the QUEST model with endogenous growth

This paper calibrates the Roeger-Varga-Veld (2008) micro-founded DSGE model with endogenous growth for all EU member states using country specific structural characteristics and employs the individual country models to analyse the macroeconomic impact of various structural reforms. We analyse the costs and benefits of reforms in terms of fiscal policy instruments such as taxes, benefits, subsidies and administrative costs faced by firms. We find that less R&D intensive countries would benefit the most from R&D promoting and skill-upgrading policies. We also find that shifting from labour to consumption taxes, reducing the benefit replacement rate and relieving administrative entry barriers are the most effective measures in those countries which have high labour taxes and entry barriers.Structural reforms, endogenous growth, DSGE modelling, EU member states, tax credits, tax shifts, entry barriers, human capital, D'Auria, Pagano, Ratto, Varga

QUEST III: an estimated DSGE model of the euro area with fiscal and monetary policy

This paper develops a DSGE model for an open economy and estimates it on euro area data using Bayesian estimation techniques. The model features nominal and real frictions, as well as financial frictions in the form of liquidity constrained households. The model incorporates active monetary and fiscal policy rules (for government consumption, investment, transfers and wage taxes) and can be used to analyse the effectiveness of stabilisation policies. To capture the unit root character of macroeconomic time-series we allow for stochastic trend in TFP, but instead of filtering data prior to estimation, we estimate the model in growth rates and stationary nominal ratios.QUEST, QUEST model, DGSE, DSGE modelling, fiscal policy, stabilisation policies, euro area, Ratto , Roeger , Jan in 't Veld

Factor Mapping and Metamodelling

In this work we present some techniques, within the realm of Global Sensitivity Analysis, which permit to address fundamental questions in term of model's understanding. In particular we are interested in developing tools which allow to determine which factor (or group of factors) are most responsible for producing model outputs Y within or outside specified bounds ranking the importance of the various input factors in terms of their influence on the variation of Y. On the other hand, we look for representing in a direct way (graphically, analytically, etc.) the relationship between input factors X_1,..., X_k and output Y in order to get a better understanding of the model itself.JRC.G.9-Econometrics and statistical support to antifrau

A comparison of eight metamodeling techniques for the simulation of N2O fluxes and N leaching from corn crops

International audienceThe environmental costs of intensive farming activities are often under-estimated or not traded by the market, even though they play an important role in addressing future society's needs. The estimation of nitrogen (N) dynamics is thus an important issue which demands detailed simulation based methods and their integrated use to correctly represent complex and non-linear interactions into cropping systems. To calculate the N2O flux and N leaching from European arable lands, a modeling framework has been developed by linking the CAPRI agro-economic dataset with the DNDC-EUROPE bio-geo-chemical model. But, despite the great power of modern calculators, their use at continental scale is often too computationally costly. By comparing several statistical methods this paper aims to design a metamodel able to approximate the expensive code of the detailed modeling approach, devising the best compromise between estimation performance and simulation speed. We describe the use of two parametric (linear) models and six non-parametric approaches: two methods based on splines (ACOSSO and SDR), one method based on kriging (DACE), a neural networks method (multilayer perceptron, MLP), SVM and a bagging method (random forest, RF). This analysis shows that, as long as few data are available to train the model, splines approaches lead to best results, while when the size of training dataset increases, SVM and RF provide faster and more accurate solutions

Using a DSGE model to look at the recent Boom-Bust Cycle in the US

This paper presents a DSGE model with residential investment and credit-constrained households estimated with US data over the period 1980Q1-2008Q4. In order to better understand speculative movements of house prices, we model land as an exhaustible resource, implying that house prices have asset market characteristics. We conduct an event study for the US over the period 1999Q1-2008Q4 which has been characterised by a housing boom and bust and examine which shocks have contributed to the evolution of GDP and its components over this period. We devote special attention to the contribution of non-fundamental shocks to asset prices over this episode.JRC.DG.G.9-Econometrics and applied statistic

A comparison of structural reform scenarios across the EU member states - Simulation-based analysis using the QUEST model with endogenous growth

This paper calibrates the Roeger-Varga-Veld (2008) micro-founded DSGE model with endogenous growth for all EU member states using country specific structural characteristics and employs the individual country models to analyse the macroeconomic impact of various structural reforms. We analyse the costs and benefits of reforms in terms of fiscal policy instruments such as taxes, benefits, subsidies and administrative costs faced by firms. We find that less R&D intensive countries would benefit the most from R&D promoting and skill-upgrading policies. We also find that shifting from labour to consumption taxes, reducing the benefit replacement rate and relieving administrative entry barriers are the most effective measures in those countries which have high labour taxes and entry barriers.JRC.G.9-Econometrics and applied statistic

European Community project MONFISPOL (grant agreement SSH-CT-2009-225149) : Deliverable 2.2.2: Beta-version of parallel routines: user manual

In this document we describe the parallel package within DYNARE (called the ``Parallel DYNARE'' hereafter). The parallel methodology has been developed taking into account two different perspectives: the ``User perspective'' and the ``Developers perspective''. The fundamental requirement of the ``User perspective'' is to allow DYNARE users to use the parallel routines easily, quickly and appropriately. Under the ``Developers perspective'', on the other hand, we need to build a core of parallelizing routines that are sufficiently abstract and modular to allow DYNARE software developers to use them easily as a sort of `parallel paradigm', for application to any DYNARE routine or portion of code containing computational intensive loops suitable for parallelization. The Parallel DYNARE comes with the official DYNARE installation package, so the preprocessor part required to interpret the cluster definition is built-in the standard DYNARE installation.JRC.G.3-Econometrics and applied statistic