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An Estimated Model of the Small Open Czech Economy with a Non-tradable Sector


  • Karel Musil



The article presents a dynamic stochastic general equilibrium (DSGE) model of a small open economy. It is based on the New Open Economy Macroeconomics (NOEM) concept and derived from microeconomic foundations. Behavior of representative households and firms contains rigidities. Structure of goods is composed of tradables and non-tradables. Monetary policy implementation is represented by a generalized Taylor rule within the inflation targeting regime. Foreign sector is exogenous, however, it is described by structural equations for a closed economy model structure. A Bayesian technique using prior information is employed for an estimation of parameters of a solved model. The estimated model and impulse response functions seem to present a suitable approximation of behavior for the small open Czech economy with inflation targeting regime.

Suggested Citation

  • Karel Musil, 2009. "An Estimated Model of the Small Open Czech Economy with a Non-tradable Sector," Bulletin of the Czech Econometric Society, The Czech Econometric Society, vol. 16(26).
  • Handle: RePEc:czx:journl:v:16:y:2009:i:26:id:162

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    DSGE model; small open economy; Balassa-Samuelson effect; modified Taylor rule; inflation targeting; Bayesian analysis;

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics


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