Overview of the New Calibrated DSGE Model of the Economy of North Macedonia

Tibor Hlédik, Joana Madjoska, Mite Miteski and Jan Vlcek

No 2024/187, IMF Working Papers from International Monetary Fund

Abstract: This paper presents a calibrated DSGE model of the economy of North Macedonia that was developed at the National Bank of the Republic of North Macedonia (NBRNM) within a technical assistance project delivered jointly by the International Monetary Fund (IMF) and the Czech National Bank (CNB). The model structure reflects the specific characteristics of the economy of North Macedonia. Namely, it is a small open economy DSGE model featuring a fixed exchange rate regime functioning in an economy experiencing structural changes over time. The paper provides a detailed overview of the theoretical structure of the model, including optimization problems of economic agents and first-order optimality conditions. A particular emphasis is put on model calibration, as well as on model evaluation, including the analysis of impulse responses, shock decompositions and historical in-sample simulation. Compared to other empirical papers focusing on DSGE models, our approach explicitly includes additional trends and wedges needed to capture non-stationary great ratios as well as the Balassa-Samuelson effect. The model has been developed to complement the existing analytic tools used at the NBRNM for policy analyses and to improve the understanding of the underlying drivers of the business cycle of the domestic economy.

Keywords: DSGE model; calibration; economy of North Macedonia; fixed exchange rate; model of the economy; investment goods producer; impulse response; goods producer; Exports; Consumption; Imports; Return on investment; Global (search for similar items in EconPapers)
Pages: 42
Date: 2024-08-30
New Economics Papers: this item is included in nep-dge, nep-opm and nep-tra
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