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Inside PESSOA - A Detailed Description of the Model

  • Vanda Almeida
  • Gabriela Lopes de Castro
  • Ricardo Mourinho Félix
  • Paulo Júlio
  • José R. Maria

This article presents a detailed description of PESSOA - Portuguese Economy Structural Small Open Analytical model. PESSOA is a dynamic general equilibrium model that can be applied to any small economy integrated in a monetary union. The main theoretical reference behind its structure is Kumhof, Muir, Mursula, and Laxton (2010). The model features non-Ricardian characteristics, a multi-sectoral production structure, imperfect market competition, and a number of nominal, real, and financial rigidities. PESSOA has been calibrated to match Portuguese and euro area data and used to illustrate a number of key macroeconomic issues, ranging from the effects of structural reforms to alternative fiscal policy options.

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Paper provided by Banco de Portugal, Economics and Research Department in its series Working Papers with number w201316.

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Date of creation: 2013
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Handle: RePEc:ptu:wpaper:w201316
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  17. Enrique G. Mendoza, 2006. "Real Exchange Rate Volatility and the Price of Nontradables in Sudden-Stop-Prone Economies," IMF Working Papers 06/88, International Monetary Fund.
  18. Vanda Almeida & Gabriela Lopes de Castro & Ricardo Mourinho Félix & José R. Maria, 2010. "Fiscal stimulus and exit strategies in a small euro area economy," Working Papers w201023, Banco de Portugal, Economics and Research Department.
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