IDEAS home Printed from https://ideas.repec.org/a/eso/journl/v47y2016i1p1-31.html
   My bibliography  Save this article

ÉIRE Mod: A DSGE Model for Ireland

Author

Listed:
  • Daragh Clancy

    (European Stability Mechanism, Luxembourg)

  • Rossana Merola

    (International Labour Organisation, Geneva, Switzerland)

Abstract

We present ÉIRE Mod, a quarterly DSGE model developed for macroeconomic policy analysis in Ireland. We simulate productivity and wage and price mark-up shocks to mimic the impact of various structural reforms aimed at improving the efficiency and competitiveness of the Irish economy. We find that all the structural reforms lead to an increase in aggregate output. However, depending on the source of the shocks, there are important differences in the transmission channels and the effect on employment and external competitiveness. This work is the first step towards the development of a suite of DSGE models for Ireland. Extensions of the core ÉIRE Mod detailed here will further enhance its analytic capabilities.

Suggested Citation

  • Daragh Clancy & Rossana Merola, 2016. "ÉIRE Mod: A DSGE Model for Ireland," The Economic and Social Review, Economic and Social Studies, vol. 47(1), pages 1-31.
  • Handle: RePEc:eso:journl:v:47:y:2016:i:1:p:1-31
    as

    Download full text from publisher

    File URL: http://www.esr.ie/article/download/504/124/504-1318-1-PB
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Michael B. Devereux & Philip R. Lane & Juanyi Xu, 2006. "Exchange Rates and Monetary Policy in Emerging Market Economies," Economic Journal, Royal Economic Society, vol. 116(511), pages 478-506, April.
    2. M. Druant & S. Fabiani & Gabor Kezdi & Ana Lamo & Fernando Martins & R. Sabbatini, 2009. "How are Firms’ Wages and Prices Linked: Survey Evidence in Europe," Working Papers w200918, Banco de Portugal, Economics and Research Department.
    3. Lane, Philip R., 2001. "The new open economy macroeconomics: a survey," Journal of International Economics, Elsevier, vol. 54(2), pages 235-266, August.
    4. Alexandr Hobza & Gilles Mourre, 2010. "Quantifying the potential macroeconomic effects of the Europe 2020 strategy: stylised scenarios," European Economy - Economic Papers 2008 - 2015 424, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    5. Gomes, S. & Jacquinot, P. & Pisani, M., 2012. "The EAGLE. A model for policy analysis of macroeconomic interdependence in the euro area," Economic Modelling, Elsevier, vol. 29(5), pages 1686-1714.
    6. Schmitt-Grohe, Stephanie & Uribe, Martin, 2003. "Closing small open economy models," Journal of International Economics, Elsevier, vol. 61(1), pages 163-185, October.
    7. Ireland, Peter N., 2001. "Sticky-price models of the business cycle: Specification and stability," Journal of Monetary Economics, Elsevier, vol. 47(1), pages 3-18, February.
    8. Negro, Marco Del & Schorfheide, Frank, 2013. "DSGE Model-Based Forecasting," Handbook of Economic Forecasting, Elsevier.
    9. Keeney, Mary & Lawless, Martina, 2010. "Wage setting and wage flexibility in Ireland - Results from a firm-level survey," Working Paper Series 1181, European Central Bank.
    10. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages 1-33, March.
    11. Igor Vetlov & Ricardo Mourinho Félix & Laure Frey & Tibor Hlédik & Zoltán Jakab & Niki Papadopoulou & Lukas Reiss & Martin Schneider, 2010. "The Implementation of Scenarios Using DSGE Models," Bank of Lithuania Working Paper Series 8, Bank of Lithuania.
    12. Benjamin Keen & Yongsheng Wang, 2007. "What is a realistic value for price adjustment costs in New Keynesian models?," Applied Economics Letters, Taylor & Francis Journals, vol. 14(11), pages 789-793.
    13. Sandra Gomes & Pascal Jacquinot & Matthias Mohr & Massimiliano Pisani, 2013. "Structural Reforms and Macroeconomic Performance in the Euro Area Countries: A Model-Based Assessment," International Finance, Wiley Blackwell, vol. 16(1), pages 23-44, February.
    14. Colin Bermingham, 2006. "Employment and Inflation Responses to an Exchange Rate Shock in a Calibrated Model," The Economic and Social Review, Economic and Social Studies, vol. 37(1), pages 27-46.
    15. Matteo Cacciatore & Romain Duval & Giuseppe Fiori, 2012. "Short-Term Gain or Pain? A DSGE Model-Based Analysis of the Short-Term Effects of Structural Reforms in Labour and Product Markets," OECD Economics Department Working Papers 948, OECD Publishing.
    16. Daragh Clancy & Rossana Merola, 2016. "ÉIRE Mod: A DSGE Model for Ireland," The Economic and Social Review, Economic and Social Studies, vol. 47(1), pages 1-31.
    17. Hiau Looi Kee & Alessandro Nicita & Marcelo Olarreaga, 2008. "Import Demand Elasticities and Trade Distortions," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 666-682, November.
    18. King, Robert G. & Rebelo, Sergio T., 1999. "Resuscitating real business cycles," Handbook of Macroeconomics,in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 14, pages 927-1007 Elsevier.
    19. Adolfson, Malin & Laseen, Stefan & Linde, Jesper & Villani, Mattias, 2007. "Bayesian estimation of an open economy DSGE model with incomplete pass-through," Journal of International Economics, Elsevier, vol. 72(2), pages 481-511, July.
    20. Patrick Honohan & Anthony J. Leddin, 2006. "Ireland in EMU - More Shocks, Less Insulation?," The Economic and Social Review, Economic and Social Studies, vol. 37(2), pages 263-294.
    21. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
    22. Tovar, Camilo Ernesto, 2009. "DSGE Models and Central Banks," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 3, pages 1-31.
    23. Francis, Neville & Ramey, Valerie A., 2005. "Is the technology-driven real business cycle hypothesis dead? Shocks and aggregate fluctuations revisited," Journal of Monetary Economics, Elsevier, vol. 52(8), pages 1379-1399, November.
    24. Edwards, Sebastian & Vegh, Carlos A., 1997. "Banks and macroeconomic disturbances under predetermined exchange rates," Journal of Monetary Economics, Elsevier, vol. 40(2), pages 239-278, October.
    25. Frank Barry & Michael B. Devereux, 2006. "A Theoretical Growth Model for Ireland," The Economic and Social Review, Economic and Social Studies, vol. 37(2), pages 245-262.
    26. Clancy, Daragh & Merola, Rossana, 2014. "The effect of macroprudential policy on endogenous credit cycles," Research Technical Papers 15/RT/14, Central Bank of Ireland.
    27. Bermingham, Colin & Conefrey, Thomas, 2014. "The Irish macroeconomic response to an external shock with an application to stress testing," Journal of Policy Modeling, Elsevier, vol. 36(3), pages 454-470.
    28. Bergin, Adele & Conefrey, Thomas & FitzGerald, John & Kearney, Ide & Znuderl, Nusa, 2013. "The HERMES-13 macroeconomic model of the Irish economy," Papers WP460, Economic and Social Research Institute (ESRI).
    29. Bergin, Adele & Conroy, Niall & Garcia Rodriguez, Abian & Holland, Dawn & McInerney, Niall & Morgenroth, Edgar & Smith, Donal, 2017. "COSMO: A new COre Structural MOdel for Ireland," Papers WP553, Economic and Social Research Institute (ESRI).
    30. Werner Roeger & Janos Varga & Jan in 't Veld, 2008. "Structural Reforms in the EU: A simulation-based analysis using the QUEST model with endogenous growth," European Economy - Economic Papers 2008 - 2015 351, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    31. Bradley, John & Fitzgerald, John, 1988. "Industrial output and factor input determination in an econometric model of a small open economy," European Economic Review, Elsevier, vol. 32(6), pages 1227-1241, July.
    32. Adjemian, Stéphane & Bastani, Houtan & Juillard, Michel & Karamé, Fréderic & Maih, Junior & Mihoubi, Ferhat & Perendia, George & Pfeifer, Johannes & Ratto, Marco & Villemot, Sébastien, 2011. "Dynare: Reference Manual Version 4," Dynare Working Papers 1, CEPREMAP, revised Feb 2018.
    33. Bradley, John & Gerald, John Fitz, 1990. "Production structures in a small open economy with mobile and indigenous investment," European Economic Review, Elsevier, vol. 34(2-3), pages 364-374, May.
    34. Julio J. Rotemberg, 1982. "Monopolistic Price Adjustment and Aggregate Output," Review of Economic Studies, Oxford University Press, vol. 49(4), pages 517-531.
    35. Alfonso Arpaia & Werner Roeger & Janos Varga & Jan in 't Veld & Alexandr Hobza & Isabel Grilo & Peter Wobst, 2007. "Quantitative assessment of Structural Reforms: Modelling the Lisbon Strategy," European Economy - Economic Papers 2008 - 2015 282, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    36. Luc Everaert & Werner Schule, 2008. "Why It Pays to Synchronize Structural Reforms in the Euro Area Across Markets and Countries," IMF Staff Papers, Palgrave Macmillan, vol. 55(2), pages 356-366, June.
    37. Merola, Rossana, 2010. "Optimal monetary policy in a small open economy with financial frictions," Discussion Paper Series 1: Economic Studies 2010,01, Deutsche Bundesbank.
    38. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bergin, Adele & Garcia Rodriguez, Abian & Mc Inerney, Niall & Morgenroth, Edgar, 2016. "Baseline: Methodology, Assumptions and Projections," Book Chapters,in: Ireland’s Economic Outlook: Perspectives and Policy Challenges Economic and Social Research Institute (ESRI).
    2. Daragh Clancy & Rossana Merola, 2016. "ÉIRE Mod: A DSGE Model for Ireland," The Economic and Social Review, Economic and Social Studies, vol. 47(1), pages 1-31.
    3. Clancy, Daragh & Merola, Rossana, 2014. "The effect of macroprudential policy on endogenous credit cycles," Research Technical Papers 15/RT/14, Central Bank of Ireland.
    4. Bergin, Adele & Conroy, Niall & Garcia Rodriguez, Abian & Holland, Dawn & McInerney, Niall & Morgenroth, Edgar & Smith, Donal, 2017. "COSMO: A new COre Structural MOdel for Ireland," Papers WP553, Economic and Social Research Institute (ESRI).
    5. Bergin, Adele & Duffy, David & Foley, Daniel & Garcia Rodriguez, Abian & Lawless, Martina & Mc Inerney, Niall & McQuinn, Kieran, 2016. "Ireland’s Economic Outlook: Perspectives and Policy Challenges," Forecasting Report, Economic and Social Research Institute (ESRI), number EO1 edited by Bergin, Adele & Morgenroth, Edgar & McQuinn, Kieran, April.
    6. repec:bis:bisifc:46-13 is not listed on IDEAS
    7. Luca Onorante & Matija Lozej & Ansgar Rannenberg, 2017. "Countercyclical capital regulation in a small open economy DSGE model," IFC Bulletins chapters,in: Bank for International Settlements (ed.), Data needs and Statistics compilation for macroprudential analysis, volume 46 Bank for International Settlements.
    8. Noel Rapa, 2016. "MEDSEA : a small open economy DSGE model for Malta," CBM Working Papers WP/05/2016, Central Bank of Malta.
    9. Lawless, Martina & Morgenroth, Edgar, 2016. "Opportunities and Risks for Foreign Direct Investment," Book Chapters,in: Ireland’s Economic Outlook: Perspectives and Policy Challenges Economic and Social Research Institute (ESRI).
    10. Duffy, David & Foley, Daniel & Mc Inerney, Niall & McQuinn, Kieran, 2016. "Demographic Change, Long-Run Housing Demand and the Related Challenges for the Irish Banking Sector," Book Chapters,in: Ireland’s Economic Outlook: Perspectives and Policy Challenges Economic and Social Research Institute (ESRI).

    More about this item

    Keywords

    macroeconomics; Ireland; economic analysis;

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eso:journl:v:47:y:2016:i:1:p:1-31. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Martina Lawless). General contact details of provider: https://www.esr.ie .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.