Two Orthogonal Continents: Testing a Two-country DSGE Model of the US and EU Using Indirect Inference

Vo Phuong Mai Le, David Meenagh, A. Patrick L. Minford and Michael R. Wickens

No E2009/3, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: We examine a two country model of the EU and the US. Each has a small sector of the labour and product markets in which there is wage/price ridigity, but otherwise enjoys flexible wages and prices with a one quarter information lag. Using a VAR to represent the data, we find the model as a whole rejected. Howerver it is accepted for particular features of the data, such as output and (marginally) inflation behaviour. The model highlights a lack of spillovers between the US and the EU.

Keywords: Bootstrap; Open economy model; DGSE; VAR; New Keynesian; New Classical; indirect inference; Wald statistic (search for similar items in EconPapers)
JEL-codes: C12 C32 C52 E1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba
Date: 2009-03, Revised 2009-12

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Working Paper: Two Orthogonal Continents? Testing a Two-country DSGE Model of the US and EU Using Indirect Inference (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:cdf:wpaper:2009/3

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