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Comparing shocks and frictions in US and euro area business cycles: a Bayesian DSGE approach

Listed author(s):
  • Frank Smets

    ()

    (European Central Bank
    CEPR
    University of Ghent)

  • Raf Wouters

    ()

    (National Bank of Belgium, Research Department)

This paper estimates a DSGE model with many types of shocks and frictions for both the US and the euro area economy over a common sample period (1974-2002). The structural estimation methodology allows us to investigate whether differences in business cycle behaviour are due to differences in the type of shocks that affect the two economies, differences in the propagation mechanism of those shocks or differences in the way the central bank responds to those economic developments. Our main conclusion is that each of those characteristics is remarkably similar across both currency areas.

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File URL: https://www.nbb.be/doc/oc/repec/reswpp/wp61.pdf
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Paper provided by National Bank of Belgium in its series Working Paper Research with number 61.

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Length: 36 pages
Date of creation: Oct 2004
Handle: RePEc:nbb:reswpp:200410-1
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