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An estimated two-country DSGE model of Austria and the Euro Area

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  • Fritz Breuss

    ()

  • Katrin Rabitsch

    ()

Abstract

We present a two-country New Open Economy Macro model of the Austrian economy within the European Union's Economic & Monetary Union (EMU). The model includes both nominal and real frictions that have proven to be important in matching business cycle facts, and that allows for an investigation of the effects and cross-country transmission of a number of structural shocks: shocks to technologies, shocks to preferences, cost-push type shocks and policy shocks. The model is estimated using Bayesian methods on quarterly data covering the period of 1976:Q1-2005:Q1. In addition to the assessment of the relative importance of various shocks, the model also allows to investigate effects of the monetary regime switch with the final stage of the EMU and investigates in how far this has altered macroeconomic transmission. We find that Austria's economy appears to react stronger to demand shocks, while in the rest of the Euro Area supply shocks have a stronger impact. Comparing the estimations on pre-EMU and EMU subsamples we find that the contribution of (rest of the) Euro Area shocks to Austria's business cycle fluctuations has increased significantly.

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Bibliographic Info

Article provided by Springer in its journal Empirica.

Volume (Year): 36 (2009)
Issue (Month): 1 (February)
Pages: 123-158

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Handle: RePEc:kap:empiri:v:36:y:2009:i:1:p:123-158

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Web page: http://www.springerlink.com/link.asp?id=100261

Related research

Keywords: European Monetary Union; DSGE modeling; Bayesian estimation; E4; E5; F4;

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  1. Smets, Frank & Wouters, Rafael, 2004. "Forecasting with a Bayesian DSGE Model: An Application to the Euro Area," CEPR Discussion Papers 4749, C.E.P.R. Discussion Papers.
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  13. Sandra Martina Leitner, 2007. "The Austrian Business Cycle - A Characterization," Economics working papers 2007-17, Department of Economics, Johannes Kepler University Linz, Austria.
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Citations

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Cited by:
  1. Gareis, Johannes & Mayer, Eric, 2012. "What drives Ireland's housing market? A Bayesian DSGE approach," W.E.P. - Würzburg Economic Papers 88, University of Würzburg, Chair for Monetary Policy and International Economics.
  2. Christian Beer, 2011. "Literature Review on the Economic Effects of the Euro on Austria," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 22–34.
  3. Matus Senaj & Milan Vyskrabka & Juraj Zeman, 2010. "MUSE: Monetary Union and Slovak Economy model," Working and Discussion Papers WP 1/2010, Research Department, National Bank of Slovakia.
  4. Moons, Cindy, 2009. "An Estimated Two-Country DSGE Model: losses from UK membership in EMU," Working Papers 2009/23, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.

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