APPLICATION OF DYNAMIC STOCHASTIC GENERAL EQUILIBRIUM MODELS TO THE CASE OF THE SERBIAN ECONOMY

Branko Urosevic and Nikola Grga

Economic Annals, 2014, vol. 59, issue 201, 35-68

Abstract: This paper proposes a dynamic stochastic general equilibrium (DSGE) model for the Serbian economy. It is a modification of the existing models of Goodhart, Osorio and Tsomocos (2009) and Martinez and Tsomocos (2012). The model introduces important features of the Serbian economy, financial dollarization and foreign ownership of the banking system, while retaining the most important element of the reference models, financial friction. To solve the model we use Dynare, a specialized Matlab program for solving DSGE models. The model is subject to three different shocks: monetary, productivity, and regulatory, and the results are presented in the form of impulse response functions. It is concluded that the proposed platform has good characteristics, but its complete application to the case of the Serbian economy requires further research.

Keywords: DSGE model; financial friction; financial dollarization; foreign ownership in banking sector (search for similar items in EconPapers)
JEL-codes: D51 E44 E47 E51 (search for similar items in EconPapers)
Date: 2014
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