IDEAS home Printed from https://ideas.repec.org/a/fau/fauart/v66y2016i3p207-235.html
   My bibliography  Save this article

The Great Recession in the Non-EMU Visegrád Countries: A Nonlinear DSGE Model with Time-Varying Parameters

Author

Listed:
  • Stanislav Tvrz

    () (National Bank of Slovakia
    Faculty of Economics and Administration, Masaryk University, Brno)

  • Osvald Vasicek

    () (Faculty of Economics and Administration, Masaryk University, Brno)

Abstract

Inspired by the radically different course and aftermath of the Great Recession in the Polish economy and the economies of the Czech Republic and Hungary in contrast to their comparable economic development before the crisis, we investigate the structural stability of these three Central European economies in that period. The question of structural stability is essential for proper application of a standard DSGE model in a given economy. In the case of significant structural changes, these should be incorporated explicitly into the model structure in order to avoid misleading results. Each of the three economies is represented by a nonlinear small open economy dynamic stochastic general equilibrium model with a financial accelerator. First, the DSGE models are estimated using Bayesian methods under the assumption of constant structural parameters. Then the development of time-varying structural parameters is estimated by means of a particle filter using second order approximation of a nonlinear DSGE model. We find several statistically significant structural changes in the Czech and Polish economies. According to the time-varying impulse response functions, the structural changes during the Great Recession curbed the negative impacts of the adverse exogenous shocks to a certain extent in the Czech and Polish economies. By contrast, the vulnerability of the Hungarian economy further increased.

Suggested Citation

  • Stanislav Tvrz & Osvald Vasicek, 2016. "The Great Recession in the Non-EMU Visegrád Countries: A Nonlinear DSGE Model with Time-Varying Parameters," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 66(3), pages 207-235, June.
  • Handle: RePEc:fau:fauart:v:66:y:2016:i:3:p:207-235
    as

    Download full text from publisher

    File URL: http://journal.fsv.cuni.cz/storage/1355_tvrz.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics,in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393 Elsevier.
    2. Christiano, Lawrence J. & Trabandt, Mathias & Walentin, Karl, 2011. "Introducing financial frictions and unemployment into a small open economy model," Journal of Economic Dynamics and Control, Elsevier, vol. 35(12), pages 1999-2041.
    3. Michał Brzoza‐Brzezina & Marcin Kolasa, 2013. "Bayesian Evaluation of DSGE Models with Financial Frictions," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(8), pages 1451-1476, December.
    4. Jakub Rysanek & Jaromir Tonner & Stanislav Tvrz & Osvald Vasicek, 2012. "Monetary Policy Implications of Financial Frictions in the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 62(5), pages 413-429, November.
    5. Jaromir Tonner & Jiri Polansky & Osvald Vašíèek, 2011. "Parameter Drifting in a DSGE Model Estimated on Czech Data," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 61(5), pages 510-524, November.
    6. Brzoza-Brzezina, Michał & Kolasa, Marcin & Makarski, Krzysztof, 2013. "The anatomy of standard DSGE models with financial frictions," Journal of Economic Dynamics and Control, Elsevier, vol. 37(1), pages 32-51.
    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. Georgiadis, Georgios & Jancokova, Martina, 2017. "Financial Globalisation, Monetary Policy Spillovers and Macro-modelling: Tales from 1001 Shocks," Globalization Institute Working Papers 314, Federal Reserve Bank of Dallas.

    More about this item

    Keywords

    DSGE model; Great Recession; time-varying parameters; particle filter; financial frictions;

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

    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:fau:fauart:v:66:y:2016:i:3:p:207-235. 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: (Lenka Herrmannova). General contact details of provider: http://edirc.repec.org/data/icunicz.html .

    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.