QMM. A steady state version
This paper studies long-run characteristics of the quarterly macro model (QMM) used at the Central Bank of Iceland; it studies if there exists a balanced growth path that QMM will replicate and if it will converge to this path. It concludes that there is no such path and therefore the model does not converge to it. The paper then studies which adjustments to QMM are required to produce a model for which there exists a realistic balanced growth path. The new model is derived with minimum changes to speci?c equations in QMM and should therefore retain its key dynamic properties. The paper checks this by comparing impulse-responses from the new balanced growth compatible model to those from QMM. Finally, the paper studies some important variables in the Icelandic economy: capital output ratio, share of wage cost, real rate of interest and equilibrium real exchange rate and their calibration for QMM. It also discusses calibration of long-run values for the exogenous variables in the model and uses the balanced growth compatible model together with these long-run values of the exogenous variables to estimate equilibrium values for endogenous variables in QMM.
|Date of creation:||Nov 2009|
|Date of revision:|
|Contact details of provider:|| Postal: Kalkofnsvegi 1, 150 Reykjavik|
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- Engelbert Stockhammer & Stefan Ederer, 2007.
"Demand effects of the falling wage share in Austria,"
Department of Economics Working Papers
wuwp106, Vienna University of Economics and Business, Department of Economics.
- Engelbert Stockhammer & Stefan Ederer, 2008. "Demand effects of the falling wage share in Austria," Empirica, Springer, vol. 35(5), pages 481-502, December.
- Robert Tchaidze, 2007. "Estimating Icelandâ€™s Real Equilibrium Exchange Rate," IMF Working Papers 07/276, International Monetary Fund.
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