IDEAS home Printed from https://ideas.repec.org/b/bcr/estudi/05.html
   My bibliography  Save this book

ARGEM: A Dynamic Stochastic General Equilibrium Model for Argentina

Editor

Listed:
  • Guillermo J. Escudé
    ()

    (Central Bank of Argentina)

Abstract

The last few years have seen an explosion of Dynamic and Stochastic General Equilibrium (DSGE) models built for policy analysis and forecasting in industrialized countries. The set of papers presented to the recent joint U.S. Federal Reserve Board-European Central Bank-IMF conference: "DSGE Modeling at Policymaking Institutions: Progress & Prospects" is a significant sample. The need for better microfounded models that can contribute to policy analysis is also experienced by developing country Central Banks. On top of the many difficulties encountered in developed countries in building, calibrating and/or estimating these models, those who seek to construct models that can be relevant in the developing country context find various additional difficulties. One of these stems from the fact that the models built for industrialized countries typically assume a freely floating exchange rate and hence can avoid modeling exchange rate policy. Most developing countries do not have a pure exchange rate float and their Central Banks regularly intervene in the foreign exchange market with varying degrees of intensity and frequency. While the opposite "corner" of a pure interest rate float with a monetary policy based on determining a path for the nominal exchange rate is not difficult to model, one of the challenges faced by developing country modelers is to incorporate intervention in the foreign exchange market as an additional tool available for a Central Bank that also intervenes in the "money" market (typically by determining an operational target for the short run interest rate). This is one of the main objectives of this paper, which on this topic builds on previous analysis by the author (see Escudé, 2006). The paper benefits from various recent developments in monetary macroeconomic modeling, including Christiano, Eichenbaum and Evans (2001) (CEE), Smets and Wouters (2003), Woodford (2003), and Adolfson, Laséen, Lindé and Villani (2005) (ALLV), to mention but a few. The model has been calibrated for the Argentine economy, and solved using Klein's (2000) generalized Schur decomposition methodology.

Suggested Citation

  • Guillermo J. Escudé (ed.), 2008. "ARGEM: A Dynamic Stochastic General Equilibrium Model for Argentina," BCRA Paper Series, Central Bank of Argentina, Economic Research Department, number 05, December.
  • Handle: RePEc:bcr:estudi:05
    as

    Download full text from publisher

    File URL: http://www.bcra.gov.ar/pdfs/investigaciones/ARGEM_finalb.pdf
    File Function: Spanish version (versión en Español)
    Download Restriction: no

    References listed on IDEAS

    as
    1. Pierpaolo Benigno & Michael Woodford, 2005. "Inflation Stabilization And Welfare: The Case Of A Distorted Steady State," Journal of the European Economic Association, MIT Press, vol. 3(6), pages 1185-1236, December.
    2. Julio J. Rotemberg & Michael Woodford, 1998. "An Optimization-Based Econometric Framework for the Evaluation of Monetary Policy: Expanded Version," NBER Technical Working Papers 0233, National Bureau of Economic Research, Inc.
    3. Klein, Paul, 2000. "Using the generalized Schur form to solve a multivariate linear rational expectations model," Journal of Economic Dynamics and Control, Elsevier, vol. 24(10), pages 1405-1423, September.
    4. Juillard, Michael & Kamenik, Ondra & Kumhof, Michael & Laxton, Douglas, 2008. "Optimal price setting and inflation inertia in a rational expectations model," Journal of Economic Dynamics and Control, Elsevier, vol. 32(8), pages 2584-2621, August.
    5. Jordi Galí & Tommaso Monacelli, 2005. "Monetary Policy and Exchange Rate Volatility in a Small Open Economy," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 707-734.
    6. King, Robert G & Watson, Mark W, 1998. "The Solution of Singular Linear Difference Systems under Rational Expectations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 1015-1026, November.
    7. Malin Adolfson & Stefan Laseen & Jesper Lindé & Mattias Villani, 2005. "An estimated New Keynesian small open economy model," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
    8. John B. Taylor, 1999. "Introduction to "Monetary Policy Rules"," NBER Chapters,in: Monetary Policy Rules, pages 1-14 National Bureau of Economic Research, Inc.
    9. Bofinger, Peter & Wollmershäuser, Timo, 2001. "Managed floating: Understanding the new international monetary order," W.E.P. - Würzburg Economic Papers 30, University of Würzburg, Chair for Monetary Policy and International Economics.
    10. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, January.
    11. Argia M. Sbordone, 2002. "An optimizing model of U.S. wage and price dynamics," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
    12. 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.
    13. John B. Taylor, 1999. "A Historical Analysis of Monetary Policy Rules," NBER Chapters,in: Monetary Policy Rules, pages 319-348 National Bureau of Economic Research, Inc.
    14. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1, April.
    15. Stephen J. Turnovsky, 2000. "Methods of Macroeconomic Dynamics, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262201232, January.
    16. De Paoli, Bianca, 2009. "Monetary policy and welfare in a small open economy," Journal of International Economics, Elsevier, vol. 77(1), pages 11-22, February.
    17. Anderson, Gary S., 2010. "A reliable and computationally efficient algorithm for imposing the saddle point property in dynamic models," Journal of Economic Dynamics and Control, Elsevier, vol. 34(3), pages 472-489, March.
    18. Pierpaolo Benigno & Michael Woodford, 2005. "Optimal stabilization policy when wages and prices are sticky: the case of a distorted steady state," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 127-180.
    19. Svensson, Lars E. O., 2000. "Open-economy inflation targeting," Journal of International Economics, Elsevier, vol. 50(1), pages 155-183, February.
    20. Jeffery D. Amato, 2005. "The role of the natural rate of interest in monetary policy," BIS Working Papers 171, Bank for International Settlements.
    21. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-666, September.
    22. Binder,M. & Pesaran,H.M., 1995. "Multivariate Rational Expectations Models and Macroeconomic Modelling: A Review and Some New Results," Cambridge Working Papers in Economics 9415, Faculty of Economics, University of Cambridge.
    23. Rochelle M. Edge & Michael T. Kiley & Jean-Philippe Laforte, 2005. "An estimated DSGE model of the US economy with an application to natural rate measures," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
    24. Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-1311, July.
    25. Frank Smets & Raf Wouters, 2003. "An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1123-1175, September.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Argentina; calibration; developing countries; DSGE models;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

    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:bcr:estudi:05. 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: (Federico Grillo). General contact details of provider: http://edirc.repec.org/data/bcraaar.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.