| 1. |
- Adolfson, Malin, et al.
(författare)
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Bayesian analysis of DSGE models : Some comments
- 2007
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Ingår i: Econometric Reviews. - : Informa UK Limited. - 0747-4938 .- 1532-4168. ; 26:2-4, s. 173-185
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Tidskriftsartikel (refereegranskat)abstract
- Sungbae An and Frank Schorfheide have provided an excellent review of the main elements of Bayesian inference in Dynamic Stochastic General Equilibrium (DSGE) models. Bayesian methods have, for reasons clearly outlined in the paper a very natural role to flay in DSGE analysis, and the appeal of the Bayesian paradigm is indeed strongly evidenced by the flood of empirical applications in the area over the last couple of years. We expect their paper to be the natural starting point for applied economists interested in learning about Bayesian techniques for analyzing DSGE models, and as such the paper is likely to have a strong influence on what will be considered best practice for estimating DSGE models. The authors have, for good reasons, chosen a stylized six-equation model to present the methodology. We shall use here the large-scale model in Adolfson et al. (2005), henceforth ALLV, to illustrate a few econometric problems which we have found to be especially important as the size of the model increases. The model in ALLV is an open economy extension of the closed economy model in Christiano et al. (2005). It consists of 25 log-linearized equations, which can be written as a state space representation With 60 state variables, many of them unobserved. Fifteen observed unfiltered time series are used to estimate 51 structural parameters. An additional complication compared to the model in An and Schorfheide's paper is that some of the coefficients in the measurement equation are non-linear functions of the structural parameters. The model is currently the main vehicle for policy analysis at Sveriges Riksbank (Central Bank of Sweden) and similar models are being developed in many other policy institutions, which testifies to the model's practical relevance. The version considered here is estimated on Euro area data over the period 1980Q1-2002Q4. We refer to ALLV for details.
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| 2. |
- Adolfson, Malin, et al.
(författare)
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Bayesian estimation of an open economy DSGE model with incomplete pass-through
- 2007
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Ingår i: Journal of International Economics. - : Elsevier BV. - 0022-1996 .- 1873-0353. ; 72:2, s. 481-511
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Tidskriftsartikel (refereegranskat)abstract
- In this paper, we develop a dynamic stochastic general equilibrium (DSGE) model for an open economy, and estimate it on Euro area data using Bayesian estimation techniques. The model incorporates several open economy features, as well as a number of nominal and real frictions that have proven to be important for the empirical fit of closed economy models. The paper offers: i) a theoretical development of the standard DSGE model into an open economy setting, ii) Bayesian estimation of the model, including assessments of the relative importance of various shocks and frictions for explaining the dynamic development of an open economy, and iii) an evaluation of the model's empirical properties using standard validation methods.
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| 3. |
- Adolfson, Malin, et al.
(författare)
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Empirical properties of closed- and open-economy DSGE models of the Euro area
- 2008
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Ingår i: Macroeconomic Dynamics. - 1365-1005 .- 1469-8056. ; 12, s. 2-19
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Tidskriftsartikel (refereegranskat)abstract
- In this paper, we compare the empirical proper-ties of closed- and open-economy DSGE models estimated on Euro area data. The comparison is made along several dimensions; we examine the models in terms of their marginal likelihoods, forecasting performance, variance decompositions, and their transmission mechanisms of monetary policy.
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| 4. |
- Adolfson, Malin
(författare)
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Export price responses to exogenous exchange rate movements
- 2001
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Ingår i: Economics Letters. - : Elsevier. - 0165-1765. ; 71:1
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Tidskriftsartikel (övrigt vetenskapligt/konstnärligt)abstract
- The export price responses to three different exogenous exchange rate movements are investigated, using data on Swedish exports of automobiles and kraft paper to three destination countries. A price determining error correction model indicates results consistent with price discrimination.
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| 5. |
- Adolfson, Malin, et al.
(författare)
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Forecasting performance of an open economy DSGE model
- 2007
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Ingår i: Econometric Reviews. - : Informa UK Limited. - 0747-4938 .- 1532-4168. ; 26:04-feb, s. 289-328
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Tidskriftsartikel (refereegranskat)abstract
- This paper analyzes the forecasting performance of an open economy dynamic stochastic general equilibrium (DSGE) model, estimated with Bayesian methods, for the Euro area during 1994Q1-2002Q4. We compare the DSGE model and a few variants of this model to various reduced form forecasting models such as vector autoregressions (VARs) and vector error correction models (VECM), estimated both by maximum likelihood and, two different Bayesian approaches, and traditional benchmark models, e.g., the random. walk. The accuracy of point forecasts, interval forecasts and the predictive distribution as a whole are assessed in, an out-of-sample rolling event evaluation using several univariate and multivariate measures. The results show that the open economy DSGE model compares well with more empirical models and thus that the tension between, rigor and fit in older generations of DSGE models is no longer present. We also critically examine the role of Bayesian model probabilities and other frequently used low-dimensional summaries, e.g., the log determinant statistic, as measures of overall forecasting performance.
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| 6. |
- Adolfson, Malin
(författare)
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Incomplete exchange rate pass-through and simple monetary policy rules
- 2007
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Ingår i: Journal of International Money and Finance. - : Elsevier. - 0261-5606. ; 26:3, s. 468-494
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Tidskriftsartikel (övrigt vetenskapligt/konstnärligt)abstract
- This paper investigates the performance of various monetary policy rules in an open economy with incomplete exchange rate pass-through. Implementing monetary policy through an exchange rate augmented policy rule does not improve social welfare compared to using an optimized Taylor rule, irrespective of the degree of pass-through. A direct exchange rate response improves welfare only if the other reaction coefficients, on inflation and output, are sub-optimal. However, an indirect exchange rate response, through a policy reaction to Consumer Price Index (CPI) inflation rather than to domestic inflation, is welfare enhancing. This result is independent of whether society values domestic or CPI inflation stabilization.
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| 7. |
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| 8. |
- Adolfson, Malin, et al.
(författare)
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Monetary policy trade-offs in an estimated open-economy DSGE model
- 2014
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Ingår i: Journal of Economic Dynamics and Control. - : Elsevier BV. - 0165-1889 .- 1879-1743. ; 42, s. 33-49
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Tidskriftsartikel (refereegranskat)abstract
- This paper studies the trade-offs between stabilizing CPI inflation and alternative measures of the output gap in Ramses, the Riksbank's estimated dynamic stochastic general equilibrium (DSGE) model of a small open economy. Our main finding is that the trade-off between stabilizing CPI inflation and the output gap strongly depends on which concept of potential output in the output gap between output and potential output is used in the loss function. If potential output is defined as a smooth trend this trade-off is much more pronounced compared to the case when potential output is defined as the output level that would prevail if prices and wages were flexible.
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| 9. |
- Adolfson, Malin
(författare)
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Monetary policy with incomplete exchange rate pass-through
- 2001
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- The central bank's optimal reaction to foreign and domestic shocks is analyzed in an inflation targeting model allowing for incomplete exchange rate pass-through. Limited pass-through is incorporated through nominal rigidities in an aggregate supply-aggregate demand model derived from some microfoundations. Three main results are obtained. First, the results suggest that the interest rate response to foreign shocks is smaller when pass-through is low. Second, the inflation-output variability trade-off becomes more favourable as pass-through decreases. Third, lower pass-through, that is larger nominal rigidity, leads to higher exchange rate volatility. With exogenous nominal price stickiness, part of the required relative price adjustment is provided through larger movements in the endogenously determined exchange rate.
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| 10. |
- Adolfson, Malin
(författare)
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Optimal monetary policy delegation under incomplete exchange rate pass-through
- 2001
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- The central bank’s optimal objective function is analyzed in a small open economy model allowing for incomplete exchange rate pass-through. The results indicate that social welfare can only be marginally improved by including an explicit exchange-rate term in the delegated objective function, irrespective of the degree of pass-through. An implicit response to the exchange rate, through Consumer Price Index (CPI) inflation targeting is, however, beneficial. Welfare can, moreover, be enhanced by appointing a central banker with a greater preference for interest rate smoothing than that of the society, as a result of surpassing some of the stabilization bias arising under a discretionary policy. Consequently, there are welfare gains from monetary policy inertia. The optimal degree of interest rate smoothing is increasing in the degree of pass-through.
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