scholarly journals On the role of expectations in Costa Rican business cycle: an econometric research

2014 ◽  
Vol 32 (1) ◽  
pp. 43
Author(s):  
Felipe A. Gómez Trejos
Keyword(s):  
Business Cycle ◽  
Rational Expectations ◽  
Dynamic Stochastic General Equilibrium ◽  
Space Representation ◽  
State Space Representation ◽  
Output Variability ◽  
Real Gdp ◽  
Expectations Formation ◽  
Output Fluctuations ◽  
Dynamic Stochastic

<p>Expectations formation of future output fluctuations as a factor for explaining Costa<br />Rican business cycle is the main subject addressed in this paper. The main contribution<br />of this research is the proposition of an econometric model for estimating the effect that<br />an increase in the next quarter expected real GDP has on current quarterly real GDP level.<br />To this end, a dynamic stochastic general equilibrium model is used as the theoretical<br />base for explaining the nature of the causality relationship between expected output<br />variability and economic fluctuations. Furthermore, a state-space representation of a<br />Rational Expectations (R.E.) model is developed for constructing an expectations updating<br />mechanism which fully characterizes the dynamics of the expected output variability. This<br />investigation concludes that a 1% increase in the next quarter’s expected GDP is predicted<br />to generate, on average, an approximate 0.67% growth on current quarterly GDP (in real<br />terms). From this modeling perspective, the econometric analysis concludes this effect<br />is statistically significant and also identifies other relevant factors for explaining Costa<br />Rican business cycle, such as the forecasts of economics variables that determine output<br />fluctuations throughout time.<br /><br /></p>

scholarly journals Business Cycles in Algerian Economy: A Bayesian DSGE Approach

2018 ◽  
Vol 2 (1) ◽  
pp. 72-100
Author(s):  
Abdelsalam BOUKHEROUFA
Keyword(s):  
Time Series ◽  
Business Cycles ◽  
Business Cycle ◽  
Equilibrium Model ◽  
Government Spending ◽  
Aggregate Demand ◽  
Dynamic Stochastic General Equilibrium ◽  
Business Cycle Fluctuations ◽  
Output Fluctuations ◽  
Dynamic Stochastic

The main objective of this paper is to highlight the most important shocks that drives the business cycles in the Algerian economy. Using Bayesian estimation techniques, we estimate a dynamic stochastic general equilibrium model (DSGE) using four time series of the Algerian macroeconomics. Through this estimated model, which succeeded in capturing the dynamics of the Algerian economy data, we found three main results: First, the main causes of business cycle fluctuations in the Algerian economy are aggregate demand shocks. Second, the of government spending shock play the most important role in output fluctuations. Third, empirical results show evidences of procyclical in government spending policies.

scholarly journals THE MISSPECIFICATION OF EXPECTATIONS IN NEW KEYNESIAN MODELS: A DSGE-VAR APPROACH

2017 ◽  
Vol 23 (3) ◽  
pp. 974-1007 ◽  
Author(s):  
Stephen J. Cole ◽  
Fabio Milani
Keyword(s):  
Rational Expectations ◽  
Model Misspecification ◽  
Dynamic Stochastic General Equilibrium ◽  
New Keynesian ◽  
Dynamic Interactions ◽  
Expectations Hypothesis ◽  
Expectations Formation ◽  
Keynesian Model ◽  
New Keynesian Models ◽  
Dynamic Stochastic

This paper tests the ability of New Keynesian models to match the data regarding a key channel for monetary transmission: the dynamic interactions between macroeconomic variables and their corresponding expectations. We exploit survey expectations data and adopt a dynamic stochastic general equilibrium (DSGE)-VAR approach to assess the extent and sources of model misspecification. The results point to serious misspecification in the expectations-formation side of the DSGE model. The rational expectations hypothesis is primarily responsible for the model's failure to capture the co-movements between observed macroeconomic expectations and realizations. Alternative models of expectations formation help partially reconcile the New Keynesian model with the data.

scholarly journals IDENTIFYING NEWS SHOCKS WITH FORECAST DATA

2019 ◽  
pp. 1-30 ◽  
Author(s):  
Yasuo Hirose ◽  
Takushi Kurozumi
Keyword(s):  
Business Cycle ◽  
General Equilibrium ◽  
Empirical Evidence ◽  
Equilibrium Model ◽  
Dynamic Stochastic General Equilibrium ◽  
Output Growth ◽  
News Shocks ◽  
Business Cycle Fluctuations ◽  
Forecast Data ◽  
Dynamic Stochastic

The empirical importance of news shocks—anticipated future shocks—in business cycle fluctuations has been explored by using only actual data when estimating models augmented with news shocks. This paper additionally exploits forecast data to identify news shocks in a canonical dynamic stochastic general equilibrium model. The estimated model shows new empirical evidence that technology news shocks are a major source of fluctuations in US output growth. Exploiting the forecast data not only generates more precise estimates of news shocks and other parameters in the model, but also increases the contribution of technology news shocks to the fluctuations.

scholarly journals Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach

2007 ◽  
Vol 97 (3) ◽  
pp. 586-606 ◽  
Author(s):  
Frank Smets ◽  
Rafael Wouters
Keyword(s):  
Business Cycle ◽  
Dynamic Stochastic General Equilibrium ◽  
Structural Shocks ◽  
Us Economy ◽  
The Us ◽  
Out Of Sample ◽  
Key Issues ◽  
Macroeconomic Time Series ◽  
Dynamic Stochastic ◽  
Out Of Sample Prediction

Using a Bayesian likelihood approach, we estimate a dynamic stochastic general equilibrium model for the US economy using seven macroeconomic time series. The model incorporates many types of real and nominal frictions and seven types of structural shocks. We show that this model is able to compete with Bayesian Vector Autoregression models in out-of-sample prediction. We investigate the relative empirical importance of the various frictions. Finally, using the estimated model, we address a number of key issues in business cycle analysis: What are the sources of business cycle fluctuations? Can the model explain the cross correlation between output and inflation? What are the effects of productivity on hours worked? What are the sources of the “Great Moderation”? (JEL D58, E23, E31, E32)

scholarly journals Output gap in the Czech economy: DSGE approach

2019 ◽  
Vol 19 (2) ◽  
pp. 137-156
Author(s):  
Jakub Bechný
Keyword(s):  
Business Cycle ◽  
General Equilibrium ◽  
Equilibrium Model ◽  
World Economy ◽  
Price Level ◽  
Dynamic Stochastic General Equilibrium ◽  
Domestic Demand ◽  
Output Gap ◽  
Dynamic Stochastic ◽  
The Business Cycle

Abstract This paper presents three measures of the output gap estimated by a dynamic stochastic general equilibrium model of the Czech economy. We argue that the most plausible description of the business cycle provides the output gap defined as a deviation from a flexible price level of output, which is generated solely by permanent growth shocks. Our model shows that 2006-2008 overheating of the economy and the following 2008-2009 slump can be largely attributed to development in a world economy and export and import sectors, while the 2012-2013 recession was caused mainly by a combination of adverse domestic demand and cost shocks.

scholarly journals New Keynesian Phillips Curve for Pakistan

2007 ◽  
Vol 46 (4II) ◽  
pp. 395-404 ◽  
Author(s):  
Ahsan Ul Haq Satti ◽  
Wasim Shahid Malik ◽  
Ghulam Saghir
Keyword(s):  
Imperfect Competition ◽  
Rational Expectations ◽  
Phillips Curve ◽  
Dynamic Stochastic General Equilibrium ◽  
New Keynesian ◽  
New Keynesian Phillips Curve ◽  
Business Cycle Theory ◽  
The Standard Model ◽  
Dynamic Stochastic ◽  
Micro Foundations

Recently macroeconomists have moved to a new neo-classical synthesis by integrating Keynesian features like imperfect competition and nominal rigidities with dynamic stochastic general equilibrium model of the Real Business Cycle Theory with micro foundations and rational expectations, [see, for instance, McCallum and Nelson (1999)]. The standard model comprises of a trinity; consumption and inflation adjustment equations with a monetary authority’s reaction function. One of the pillar of the modelinflation adjustment equation, also known as New Keynesian Phillips Curve (NKPC) in the literature, has at least two important features; unlike the traditional Phillips curve the NKPC is forward-looking; and it has been derived from the profit maximising behaviour of the firms in a monopolistically competitive market structure.

scholarly journals Macroeconomic Models: Assessment of the 2008 Financial Crisis in the Framework of Dynamic Stockastic General Equilibrium and Agent Based Modeling

2018 ◽  
Author(s):  
Hakan Acet ◽  
Zeynep Karaçor ◽  
Özlem Alkan
Keyword(s):  
General Equilibrium ◽  
Rational Expectations ◽  
Dynamic Stochastic General Equilibrium ◽  
Agent Based Modeling ◽  
Equilibrium Analysis ◽  
Agent Based ◽  
Macroeconomic Models ◽  
Scarce Resources ◽  
Dynamic Stochastic ◽  
The 2008 Financial Crisis

As a result of economic crisis occurred in the mid-1970s, the macroeconomic models that were exist at that time had been criticized about their validity, and then the dynamic Stochastic general equilibrium analysis had been developed accordingly. Dynamic Stochastic general equilibrium models, which combine microeconomic foundations by assuming that households or firms are behaving optimally with rational expectations against scarce resources, have been also criticized for their adequacy with the onset of the 2008 crisis. After this crisis, agent-based modeling attracted attention and started to be adopted more in the literature. In this study, 2008 crisis will be evaluated by comparing both models.

ON THE EXPECTATIONAL STABILITY OF RATIONAL EXPECTATIONS EQUILIBRIA IN NEWS-SHOCK DSGE MODELS

2020 ◽  
pp. 1-25
Author(s):  
Brian Dombeck
Keyword(s):  
Stability Property ◽  
Rational Expectations ◽  
Structural Changes ◽  
Dynamic Stochastic General Equilibrium ◽  
Macroeconomic Fluctuations ◽  
Dsge Models ◽  
News Shocks ◽  
News Shock ◽  
Information Set ◽  
Dynamic Stochastic

The expectational stability (E-stability) property of rational expectations equilibria (REE) in linear macroeconomic dynamic stochastic general equilibrium (DSGE) models is known to be sensitive to the information available to decision makers as well as the structure of the economic environment considered. Models featuring news shocks as a source of macroeconomic fluctuations depart from traditional assumptions regarding both the structure of the economy and the information set of agents. This paper investigates whether E-stability of REE is affected by either the inclusion of news shocks by themselves or the complementary structural changes. The main results find that the E-stability property of REE is robust to the inclusion (or exclusion) of news shocks and that well-known news-shock DSGE models permit REE which are simultaneously E-stable and capable of producing qualitatively realistic expectationally driven business cycles.

scholarly journals Forecasting for the Optimal Numbers of COVID-19 Infection to Maintain Economic Circular Flows of Thailand

Economies ◽  
2021 ◽  
Vol 9 (4) ◽  
pp. 151
Author(s):  
Chanamart Intapan ◽  
Chukiat Chaiboonsri ◽  
Pairach Piboonrungroj
Keyword(s):  
Bayesian Inference ◽  
Theoretical Model ◽  
Empirical Studies ◽  
Dynamic Stochastic General Equilibrium ◽  
Dsge Models ◽  
Daily Number ◽  
Real Gdp ◽  
Circular Flows ◽  
Dynamic Stochastic ◽  
To Come

We evaluated the movement in the daily number of COVID-19 cases in response to the real GDP during the COVID-19 pandemic in Thailand from Q1 2020 to Q1 2021. The aim of the study was to find the number of COVID-19 cases that could maintain circulation of the country’s economy. This is the question that most of the world’s economies have been facing and trying to figure out. Our theoretical model introduced dynamic stochastic general equilibrium (DSGE) models with a special emphasis on Bayesian inference. From the results of the study, it was found that the most reasonable number of COVID-19 cases that still maintains circulation of the country’s economy is about 3000 per month or about 9000 per quarter. This demonstrates that the daily number of COVID-19 cases significantly affects the growth of Thailand’s real GDP. Economists and policymakers can use the results of empirical studies to come up with guidelines or policies that can be implemented to reduce the number of infections to satisfactory levels in order to avoid Thailand lockdown. Although the COVID-19 outbreak can be suppressed through lockdown, the country cannot be locked down all the time.

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