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Structural heterogeneity or asymmetric shocks? Poland and the euro area through the lens of a two-country DSGE model

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Abstract

This paper presents a two-country model linking Poland and the euro area and applies it for assessment of heterogeneity across these two regions. Overall, our results can be seen as rather inconclusive about the differences in parameters describing agents’ decision-making in Poland and in the euro area. On the contrary, we find strong evidence for heterogeneity in terms of volatility and synchronization of shocks hitting both economies. Our results may be viewed as a step towards estimating the costs of Poland’s entry to the European Monetary Union, associated with giving up the monetary autonomy and losing benefits from stabilizing movements of the exchange rate.

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File URL: http://www.nbp.pl/publikacje/materialy_i_studia/49_en.pdf
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Bibliographic Info

Paper provided by National Bank of Poland, Economic Institute in its series National Bank of Poland Working Papers with number 49.

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Length: 50
Date of creation: Jul 2008
Date of revision:
Handle: RePEc:nbp:nbpmis:49

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Keywords: two-country DSE; Bayesian estimation; heterogenity;

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