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An Estimated Dynamic Stochastic General Equilibrium Model of the Jordanian Economy

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Author Info

  • Tigran Poghosyan
  • Samya Beidas-Strom

Abstract

This paper presents and estimates a small open economy dynamic stochastic general-equilibrium model (DSGE) for the Jordanian economy. The model features nominal and real rigidities, imperfect competition and habit formation in the consumer’s utility function. Oil imports are explicitly modeled in the consumption basket and domestic production. Bayesian estimation methods are employed on quarterly Jordanian data. The model’s properties are described by impulse response analysis of identified structural shocks pertinent to the economy. These properties assess the effectiveness of the pegged exchange rate regime in minimizing inflation and output trade-offs. The estimates of the structural parameters fall within plausible ranges, and simulation results suggest that while the peg amplifies output, consumption and (price and wage) inflation volatility, it offers a relatively low risk premium.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/28.

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Length: 51
Date of creation: 01 Feb 2011
Date of revision:
Handle: RePEc:imf:imfwpa:11/28

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Related research

Keywords: Jordan; Income; Exchange rate depreciation; Exchange rate appreciation; Economic models; External shocks; Oil prices; Price adjustments; Wage policy;

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References

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  1. Jesús Fernández-Villaverde & Juan F. Rubio, 2003. "Comparing Dynamic Equilibrium Economies to Data," Levine's Working Paper Archive 506439000000000309, David K. Levine.
  2. Magda E. Kandil & S. Beidas, 2005. "Setting the Stage for a National Currency in the West Bank and Gaza: The Choice of Exchange Rate Regime," IMF Working Papers 05/70, International Monetary Fund.
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Cited by:
  1. Mohaddes, K. & Raissi, M., 2011. "Oil Prices, External Income, and Growth: Lessons from Jordan," Cambridge Working Papers in Economics 1164, Faculty of Economics, University of Cambridge.

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