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Comparing business cycles in the Eurozone and in Poland: a Bayesian DSGE approach

Author

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  • Andrzej Cieślik

    (University of Warsaw, Faculty of Economic Sciences)

  • Jan Teresiński

    (European University Institute, Department of Economics)

Abstract

In this article we compare business cycles in the Eurozone and in Poland using a DSGE approach. We estimate the Smets and Wouters (2007) model using Bayesian methods and analyze impulse response functions of model variables, as well as their variance decomposition. Although we do not find significant differences in structural parameters’ estimates, it turns out that persistence and volatility of shocks differ among two economies. Impulse response functions are comparable and output fluctuations are driven by similar demand shocks, but we observe a significant effect of the exogenous spending shock in the Eurozone and the price markup shock in Poland. Our analysis also shows that the euro adoption in Poland is currently not recommended, unless relevant changes in macroeconomic and labour market policies are implemented.

Suggested Citation

  • Andrzej Cieślik & Jan Teresiński, 2020. "Comparing business cycles in the Eurozone and in Poland: a Bayesian DSGE approach," Bank i Kredyt, Narodowy Bank Polski, vol. 51(4), pages 317-366.
    • Handle: RePEc:nbp:nbpbik:v:51:y:2020:i:4:p:317-366
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    References listed on IDEAS

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    Cited by:

    1. Mariusz Górajski & Zbigniew Kuchta, 2022. "Which hallmarks of optimal monetary policy rules matter in Poland? A stochastic dominance approach," Bank i Kredyt, Narodowy Bank Polski, vol. 53(2), pages 149-182.

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    More about this item

    Keywords

    Bayesian estimation; business cycles; DSGE model; Eurozone; Poland;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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