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Output gap in the Czech economy: DSGE approach

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  • Bechný Jakub

    (Masaryk University, Faculty of Economics and Administration, Department of Economics, Lipová 41a, 602 00 Brno, Czech Republic)

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.

Suggested Citation

  • Bechný Jakub, 2019. "Output gap in the Czech economy: DSGE approach," Review of Economic Perspectives, Sciendo, vol. 19(2), pages 137-156, June.
    • Handle: RePEc:vrs:reoecp:v:19:y:2019:i:2:p:137-156:n:4
    DOI: 10.2478/revecp-2019-0008
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    References listed on IDEAS

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    More about this item

    Keywords

    DSGE model; labour market; output gap; small open economy;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications

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