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An Estimated Dynamic Stochastic General Equilibrium Model with Financial Frictions for Estonia

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  • Paolo Gelain
  • Dmitry Kulikov

Abstract

In this paper we estimate an extended version of the previously estimated small open economy dynamic stochastic general equilibrium model for Estonia (Gelain and Kulikov 2009). Here we introduce financial frictions, in the form of the so-called financial accelerator. Our main findings are: (1) financial frictions improve the ability of the model to fit the data; (2) the financial shock is relevant in explaining the variance of the macroeconomic variables; (3) impulse response functions describe the expected amplification of shocks, except for some of them (e.g., the technology shock); and (4) all of the nominal and real rigidities are important for obtaining a better fit of the model, with the exception of real wages.

Suggested Citation

  • Paolo Gelain & Dmitry Kulikov, 2011. "An Estimated Dynamic Stochastic General Equilibrium Model with Financial Frictions for Estonia," Eastern European Economics, Taylor & Francis Journals, vol. 49(5), pages 97-120, September.
    • Handle: RePEc:mes:eaeuec:v:49:y:2011:i:5:p:97-120
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    Cited by:

    1. Dmitry Kulikov & Aleksei Netsunajev, 2013. "Identifying monetary policy shocks via heteroskedasticity: a Bayesian approach," Bank of Estonia Working Papers wp2013-9, Bank of Estonia, revised 09 Dec 2013.
    2. Rannenberg, Ansgar & Schoder, Christian & Strasky, Jan, 2015. "The macroeconomic effects of the Euro Area's fiscal consolidation 2011-2013: A Simulation-based approach," Research Technical Papers 03/RT/15, Central Bank of Ireland.
    3. Ansgar Rannenberg & Christian Schoder & Jan Strásky, 2015. "The macroeconomic effects of the Euro Area?s fiscal consolidation 2011-2013," IMK Working Paper 156-2015, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    4. Mara Pirovano, 2013. "Household and firm leverage, capital flows and monetary policy in a small open economy," Working Paper Research 246, National Bank of Belgium.
    5. Copaciu, Mihai & Nalban, Valeriu & Bulete, Cristian, 2015. "R.E.M. 2.0, An estimated DSGE model for Romania," Dynare Working Papers 48, CEPREMAP.
    6. Amiri, Hossein & Sayadi, Mohammad & Mamipour, Siab, 2021. "Oil Price Shocks and Macroeconomic Outcomes; Fresh Evidences from a scenario-based NK-DSGE analysis for oil-exporting countries," Resources Policy, Elsevier, vol. 74(C).

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