An Estimated DSGE Model Under the New Keynesian Framework for Mexico

Alejandro Steven Fonseca-Zendejas, Carmen Borrego-Salcido () and Francisco Venegas-Martínez
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Alejandro Steven Fonseca-Zendejas: Universidad Loyola Andalucía
Carmen Borrego-Salcido: Instituto Politécnico Nacional (IPN)

Computational Economics, 2025, vol. 66, issue 2, No 11, 1297-1320

Abstract: Abstract This study develops and estimates a New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model tailored to the Mexican economy using for calibration Bayesian techniques. The model highlights the interactions among the households, the firms, and the central bank, focusing on the impacts of monetary policy, inflation, and technology shocks. Impulse response functions and variance decomposition are employed to assess the dynamic effects of these shocks on key macroeconomic variables. The findings emphasize the significant role of the Mexican expansionary monetary policy in stimulating output in the short term, while inflationary pressures adversely affect economic activity. Based on the results, the technology shock has more persistent effects on output than inflation. This analysis underscores the model usefulness for understanding policy decisions in emerging markets like Mexico.

Keywords: Bayesian procedures; Business cycle; DSGE model; Monetary policy; Structural shocks (search for similar items in EconPapers)
JEL-codes: C11 C13 D58 E30 E32 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10614-024-10742-x

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