Output and welfare effect of green credit in China: Evidence from an estimated DSGE model

We analyze the impact of overconfidence on the timing of entry in markets, profits, and welfare using an extension of the quantity commitment game. Players have private information about costs, one player is overconfident, and the other one rational. We find that for slight levels of overconfidence and intermediate cost asymmetries, there is a unique cost-dependent equilibrium where the overconfident player has a higher ex-ante probability of being the Stackelberg leader. Overconfidence lowers the profit of the rational player but can increase that of the overconfident player. Consumer rents increase with overconfidence while producer rents decrease which leads to an ambiguous welfare effect.

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LABOR-MARKET HETEROGENEITY, AGGREGATION, AND POLICY (IN)VARIANCE OF DSGE MODEL PARAMETERS

Journal of the European Economic Association ◽

10.1111/j.1542-4774.2012.01098.x ◽

2013 ◽

Vol 11 ◽

pp. 193-220 ◽

Cited By ~ 24

Author(s):

Yongsung Chang ◽

Sun-Bin Kim ◽

Frank Schorfheide

Keyword(s):

Labor Market ◽

Model Parameters ◽

Dsge Model

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Wage Rigidity Impacts on Unemployment and Inflation Persistence in Tunisia: Evidence from an Estimated DSGE Model

Journal of the Knowledge Economy ◽

10.1007/s13132-021-00751-8 ◽

2021 ◽

Author(s):

Kawther Alimi ◽

Mohamed Chakroun

Keyword(s):

Wage Rigidity ◽

Dsge Model ◽

Inflation Persistence

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South Africa’s economic response to monetary policy uncertainty

Journal of Economic Studies ◽

10.1108/jes-07-2015-0131 ◽

2017 ◽

Vol 44 (2) ◽

pp. 282-293 ◽

Cited By ~ 1

Author(s):

Mehmet Balcilar ◽

Rangan Gupta ◽

Charl Jooste

Keyword(s):

Monetary Policy ◽

Interest Rates ◽

Stochastic Volatility ◽

Stochastic Volatility Model ◽

Economic Consequences ◽

Policy Uncertainty ◽

Dsge Model ◽

Content Type ◽

Volatility Model ◽

Central Bankers

Purpose The purpose of this paper is to study the evolution of monetary policy uncertainty and its impact on the South African economy. Design/methodology/approach The authors use a sign restricted SVAR with an endogenous feedback of stochastic volatility to evaluate the sign and size of uncertainty shocks. The authors use a nonlinear DSGE model to gain deeper insights about the transmission mechanism of monetary policy uncertainty. Findings The authors show that monetary policy volatility is high and constant. Both inflation and interest rates decline in response to uncertainty. Output rebounds quickly after a contemporaneous decrease. The DSGE model shows that the size of the uncertainty shock matters – high uncertainty can lead to a severe contraction in output, inflation and interest rates. Research limitations/implications The authors model only a few variables in the SVAR – thus missing perhaps other possible channels of shock transmission. Practical implications There is a lesson for monetary policy: monetary policy uncertainty, in isolation from general macroeconomic uncertainty, often creates unintended adverse consequences and can perpetuate a weak economic environment. The tasks of central bankers are incredibly difficult. Their models project output and inflation with relatively large uncertainty based on many shocks emanating from various sources. It matters how central bankers react to these expectations and how they communicate the underlying risks associated with setting interest rates. Originality/value This is the first study that looks into monetary policy uncertainty into South Africa using a stochastic volatility model and a nonlinear DSGE model. The results should be very useful for the Central Bank as it highlights how uncertainty, that they create, can have adverse economic consequences.

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