Assessing the fit of small open economy DSGEs

Troy Matheson ()

Journal of Macroeconomics, 2010, vol. 32, issue 3, 906-920

Abstract: We describe a simple extension of the Monacelli (2005) small open economy model that incorporates a non-tradable good, habit persistence and price indexation. The empirical fit of eight different specifications of this model is then tested in a Bayesian framework using data for three small open economies; Australia, Canada, and New Zealand. The results show that the model with a non-tradable good fits the data better than the one-good model across all specifications considered. In contrast to Rabanal and Rubio-Ramarez (2005), we find that adding price indexation to either the one- or two-good model deteriorates overall empirical fit.

Keywords: DSGE; Small; open; economy (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (23)

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Working Paper: Assessing the fit of small open economy DSGEs (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:32:y:2010:i:3:p:906-920

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