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A dynamic stochastic general equilibrium model for Switzerland

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  • Nicolas Alexis Cuche-Curti
  • Harris Dellas
  • Jean-Marc Natal

Abstract

This paper presents a DSGE (dynamic stochastic general equilibrium) model of the Swiss economy used since 2007 in the monetary policy decision process at the Swiss National Bank. In addition to forecasting the likely course of main macro variables under various scenarios for the Swiss economy, the model DSGE-CH serves as a laboratory for studying business cycles and examining the effects of actual and hypothetical monetary policies. The microfounded model DSGE-CH represents Switzerland as a small open economy with optimizing economic agents facing several real and nominal rigidities and exogenous foreign and domestic shocks. The comparison of the model's implications with the real world indicates that DSGE-CH performs well along standard dimensions. It captures the overall stochastic structure of the Swiss economy as represented by the moments of its key macroeconomic variables, furthermore, it has appropriate dynamic properties, as judged by its impulse response functions. Finally, it quite accurately replicates the historical path of major Swiss variables.

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Bibliographic Info

Paper provided by Swiss National Bank in its series Economic Studies with number 2009-05.

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Length: 49 pages
Date of creation: Oct 2009
Date of revision:
Handle: RePEc:snb:snbecs:2009-05

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Keywords: DSGE; forecasting; small open economy; Switzerland;

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References

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  1. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, Elsevier, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393 Elsevier.
  2. Hilde Bjørnland & Leif Brubakk & Anne Jore, 2008. "Forecasting inflation with an uncertain output gap," Empirical Economics, Springer, Springer, vol. 35(3), pages 413-436, November.
  3. Kollmann, Robert, 2002. "Monetary policy rules in the open economy: effects on welfare and business cycles," Journal of Monetary Economics, Elsevier, Elsevier, vol. 49(5), pages 989-1015, July.
  4. Stephen Murchison & Andrew Rennison, 2006. "ToTEM: The Bank of Canada's New Quarterly Projection Model," Technical Reports, Bank of Canada 97, Bank of Canada.
  5. Adolfson, Malin & Laséen, Stefan & Lindé, Jesper & Villani, Mattias, 2005. "Bayesian Estimation of an Open Economy DSGE Model with Incomplete Pass-Through," Working Paper Series, Sveriges Riksbank (Central Bank of Sweden) 179, Sveriges Riksbank (Central Bank of Sweden).
  6. Nicolas Cuche-Curti & Harris Dellas & Jean-Marc Natal, 2010. "Price Stability and the Case for Flexible Exchange Rates," Open Economies Review, Springer, Springer, vol. 21(1), pages 3-16, February.
  7. Jaromir Benes & Tibor Hledik & Michael Kumhof & David Vavra, 2005. "An Economy in Transition and DSGE: What the Czech National Bank’s New Projection Model Needs," Working Papers, Czech National Bank, Research Department 2005/12, Czech National Bank, Research Department.
  8. Malin Adolfson & Michael K. Andersson & Jesper Lindé & Mattias Villani & Anders Vredin, 2007. "Modern Forecasting Models in Action: Improving Macroeconomic Analyses at Central Banks," International Journal of Central Banking, International Journal of Central Banking, International Journal of Central Banking, vol. 3(4), pages 111-144, December.
  9. Nicolas A. Cuche-Curti & Harris Dellas & Jean-Marc Natal, 2008. "Inflation Targeting in a Small Open Economy," International Finance, Wiley Blackwell, Wiley Blackwell, vol. 11(1), pages 1-18, 05.
  10. Collard, Fabrice & Dellas, Harris, 2004. "The New Keynesian Model with Imperfect Information and Learning," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 273, Institut d'Économie Industrielle (IDEI), Toulouse.
  11. Daniel Kessler & Mark McClellan, 1999. "Designing Hospital Antitrust Policy to Promote Social Welfare," NBER Working Papers 6897, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Johana Maritsa Hernández Henao & Last: Hernández Henao, 2013. "Demanda externa, términos de intercambio y el papel de la política monetaria durante la crisis de 2008," Documentos de Investigación - Research Papers, Centro de Estudios Monetarios Latinoamericanos, CEMLA 7, Centro de Estudios Monetarios Latinoamericanos, CEMLA.
  2. Gregor Bäurle & Elizabeth Steiner, 2013. "How do individual sectors respond to macroeconomic shocks? A structural dynamic factor approach applied to Swiss data," Working Papers, Swiss National Bank 2013-09, Swiss National Bank.
  3. Marco Huwiler & Daniel Kaufmann, 2013. "Combining disaggregate forecasts for inflation: The SNB's ARIMA model," Economic Studies, Swiss National Bank 2013-07, Swiss National Bank.
  4. Nicolas Cuche-Curti & Harris Dellas & Jean-Marc Natal, 2010. "Price Stability and the Case for Flexible Exchange Rates," Open Economies Review, Springer, Springer, vol. 21(1), pages 3-16, February.
  5. Kaufmann, Daniel & Bäurle, Gregor, 2013. "Exchange Rate and Price Dynamics at the Zero Lower Bound," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order, Verein für Socialpolitik / German Economic Association 79872, Verein für Socialpolitik / German Economic Association.

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