Prague Economic Papers 2019, 28(5):612-630 | DOI: 10.18267/j.pep.724

Input-Output DSGE Model for the Czech Republic

Kateřina Gawthorpe
University of Economics, Prague, Department of Microeconomics, Prague, Czech Republic

This study questions the importance of accounting for sectoral heterogeneity in a DSGE model for the Czech Republic. The benchmark DSGE model originally developed by the Czech Ministry of Finance benefits from features such as wage and price stickiness, habit formation in the utility function and capital adjustment costs. The Input-Output DSGE model extended hereby proves to provide more precise estimates for the evolution of aggregate variables and to supply a more detailed structure of the economy. The set of variables the dynamics of which significantly improve consists of inflation rate and nominal interest rate. The disaggregated model also fits data well in terms of sectoral production functions. Finally, the absence of industrial heterogeneity in the model is shown to lead to an underestimation of the impact of the technology shock on the Czech gross domestic product.

Keywords: Czech Republic, DSGE, Input-Output DSGE model
JEL classification: C67, C68, E17

Received: February 7, 2018; Accepted: January 24, 2019; Prepublished online: September 24, 2019; Published: November 1, 2019  Show citation

ACS AIP APA ASA Harvard Chicago IEEE ISO690 MLA NLM Turabian Vancouver
Gawthorpe, K. (2019). Input-Output DSGE Model for the Czech Republic. Prague Economic Papers, 28(5), 612-630. doi: 10.18267/j.pep.724
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. Aliyev, I., Bobková, B. (2014). Extended DSGE model of the Czech economy. Ministry of Finance of the Czech Republic, (1). Available at: www.mfcr.cz
    2. Ambriško, R., Babecký, J., Ryšánek, J., Valenta, V. (2015). Assessing the Impact of Fiscal Measures on the Czech Economy. Economic Modelling, 44, 350-357, http://doi.org/10.1016/j.econmod.2014.07.021 Go to original source...
    3. Aoki, K. (2001). Optimal Monetary Policy Responses to Relative-price Changes. Journal of Monetary Economics, 48(1), 55-80, http://doi.org/10.1016/S0304-3932(01)00069-1 Go to original source...
    4. Benigno, P. (2004). Optimal Monetary Policy in a Currency Area. Journal of International Economics, 63(2), 293-320, http://doi.org/10.1016/S0022-1996(03)00055-2 Go to original source...
    5. Bisová, S., Javorská, E., Vltavská, K., Zouhar, J. (2013). Input-output Interactions in a DSGE Framework. Conference Paper. Available at: https://www.researchgate.net/publication/268208686_Input-output_interactions_in_a_DSGE_framework
    6. Bordo, M. D., Lane, J. L., Redish, A. (2004). Good versus Bad Deflation: Lessons from the Gold Standard Era. National Bureau of Economic Research. Working Paper No. 10329, https://doi.org/10.3386/w10329. Available at: http://www.nber.org/papers/w10329 Go to original source...
    7. Bouakez, H., Cardia, E., Ruge-Murcia, F. J. (2009a). Sectoral Price Rigidity and Aggregate Dynamics. Social Science Research Network. Rochester, NY Working Paper No. 09-06. Available at: http://papers.ssrn.com/abstract=1349107 Go to original source...
    8. Bouakez, H., Cardia, E., Ruge-Murcia, F. J. (2009b). The Transmission of Monetary Policy in a Multisector Economy. International Economic Review, 50(4), 1243-1266, http://doi.org/10.1111/j.1468-2354.2009.00567.x Go to original source...
    9. Caraiani, P. (2009). An Analysis of Economic Policies in Romania Using a Multi-sectoral DSGE Model. Metalurgia International, 14(4), 63-68. Available at: https://www.researchgate.net/publication/286473147_An_analysis_of_economic_policies_in_Romania_using_a_multi-sectoral_DSGE_model
    10. ČSÚ (2016). Český statistický úřad | ČSÚ. (n.d.). [Retrieved 2016-04-25] Available at: https://www.czso.cz/
    11. Christiano, L. J., Eichenbaum, M., Evans, C. L. (2005). Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy. Journal of Political Economy, 113(1), 1-45. http://doi.org/10.1086/426038 Go to original source...
    12. Dixit, A. K., Stiglitz, J. E. (1977). Monopolistic Competition and Optimum Product Diversity. The American Economic Review, 67(3), 297-308. Available at: http://www.vwl.tuwien.ac.at/hanappi/ageso/rp/dixit_1977.pdf
    13. Galí, J. (2015). Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework and Its Applications. Princeton, New Jersey: Princeton University Press. ISBN 978-1-400-86627-4.
    14. Gawthorpe, K., Šafr, K. (2015). Decomposition of Impact of Shocks on Individual Sectors: Case of the Czech Republic. Journal of Global Academic Institute Education and Social Sciences, 2(1), 61-73. Available at: http://www.globalacademicinstitute.com/wp-content/uploads/jgaiess_vol_1_no_2.pdf#page=64
    15. Huang, K. X. D., Liu, Z. (2005). Inflation Targeting: What Inflation Rate to Target? Journal of Monetary Economics, 52(8), 1435-1462, http://doi.org/10.1016/j.jmoneco.2004.08.008 Go to original source...
    16. McCandless, G. T. (2008). ABCs of RBCs. Cambridge, Massachusetts, USA: Harvard University Press. ISBN 9780674028142. Available at: Go to original source...
    17. Peersman, G., Smets, F. (2002). The Industry Effects of Monetary Policy in the Euro Area. ECB. Working Paper No. 165. Available at: http://papers.ssrn.com/abstract=358041 Go to original source...
    18. Šafr, K. (2016). Pilot Application of the Dynamic Input-Output Model. Case Study of the Czech Republic 2005-2013. Statistika: Statistics and Economy Journal, 96(2), 15-31, Available at: https://www.czso.cz/documents/10180/32912824/32019716q2015.pdf/c554c8bd-f80b-4cfa-985c-2516c87b428d?version=1.1
    19. Smets, F., Wouters, R. (2007). Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach. National Bank of Belgium. Working Paper No. 109, https://doi.org/10.2139/ssrn.1687574. Available at: http://papers.ssrn.com/abstract=1687574 Go to original source...

    This is an open access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY NC ND 4.0), which permits non-comercial use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content