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A DSGE Model with Financial Dollarization - the Case of Serbia

Author

Listed:
  • Mirko Djukic
  • Tibor Hledik
  • Jiri Polansky
  • Ljubica Trajcev
  • Jan Vlcek

Abstract

We amend a DSGE model of a small open economy by adding financial euroization in order to capture the main channels of the monetary transmission mechanism in match the Serbian data. In contrast to the standard DSGE workhorse, the model encompasses commercial banks and foreign-exchange-denominated deposits and loans. Given these features, the model is well suited to evaluating effects of the nominal exchange rate on the financial wealth and consumption of households. The model structure, including optimization problems and first-order conditions, is provided in the paper. The model properties are tested to match the stylized facts of dollarized economies. Specifically, the model is calibrated to the Serbian data, and a model-consistent multivariate filter is used to identify unobserved trends and gaps.

Suggested Citation

  • Mirko Djukic & Tibor Hledik & Jiri Polansky & Ljubica Trajcev & Jan Vlcek, 2017. "A DSGE Model with Financial Dollarization - the Case of Serbia," Working Papers 2017/02, Czech National Bank.
  • Handle: RePEc:cnb:wpaper:2017/02
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    References listed on IDEAS

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    More about this item

    Keywords

    DSGE model; financial dollarization;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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