An estimated Canadian DSGE model with nominal and real rigidities

Ali Dib

Canadian Journal of Economics, 2003, vol. 36, issue 4, 949-972

Abstract: We develop a dynamic, stochastic, general-equilibrium (DSGE) model due to Ireland (1997) and others and estimate it for the Canadian economy to analyse the real effects of monetary policy shocks. To generate high and persistent real effects, the model combines nominal frictions in the form of costly price adjustment with real rigidities modelled as convex costs of adjusting capital and-or employment. The structural parameters identifying transmission channels are estimated econometrically using a maximum-likelihood procedure with a Kalman filter. The estimated nominal and real rigidities impart substantial and persistent real effects following a monetary policy shock. Furthermore, the results suggest that the monetary authority has accommodated technology shocks and has successfully offset the real effects of money-demand shocks, by actively responding to these shocks.

JEL-codes: E31 E32 E52 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (44)

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Working Paper: An Estimated Canadian DSGE Model with Nominal and Real Rigidities (2001)
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