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LOLA 2.0: Luxembourg OverLapping generation model for policy Analysis

  • Luca Marchiori


  • Olivier Pierrard


Beyond cyclical movements, it may be helpful to understand how structural forces or policies shape an economy in the longer term. With such remote horizons, it is crucial to base analysis on an appropriate tool. In this paper, we build an overlapping generation structure with New Open Economy Macroeconomics and labour market frictions à la Diamond-Mortensen-Pissarides. The main novelty over LOLA 1.0 is the integration of current account and exchange rate dynamics according to the New Open Economy Macroeconomics approach. We calibrate themodel on Luxembourg data. Byway of illustration, we study the interactions between expected demographic changes, labour market dynamics and public finance, and we look at the recently proposed policy responses.

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Paper provided by Central Bank of Luxembourg in its series BCL working papers with number 76.

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Length: 41 pages
Date of creation: Jul 2012
Date of revision:
Handle: RePEc:bcl:bclwop:bclwp076
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