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Structural heterogeneity or asymmetric shocks? Poland and the euro area through the lens of a two-country DSGE model

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Abstract

This paper presents a two-country model linking Poland and the euro area and applies it for assessment of heterogeneity across these two regions. Overall, our results can be seen as rather inconclusive about the differences in parameters describing agents’ decision-making in Poland and in the euro area. On the contrary, we find strong evidence for heterogeneity in terms of volatility and synchronization of shocks hitting both economies. Our results may be viewed as a step towards estimating the costs of Poland’s entry to the European Monetary Union, associated with giving up the monetary autonomy and losing benefits from stabilizing movements of the exchange rate.

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  • Marcin Kolasa, 2008. "Structural heterogeneity or asymmetric shocks? Poland and the euro area through the lens of a two-country DSGE model," NBP Working Papers 49, Narodowy Bank Polski.
    • Handle: RePEc:nbp:nbpmis:49
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    More about this item

    Keywords

    two-country DSE; Bayesian estimation; heterogenity;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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