Structural Trends and Cycles in a DSGE Model for Brazil

Silvio Costa

No 434, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: This paper builds and estimates a structural growth model with micro-founded specifications of trends and cycles to allow a consistent multivariate filtering of key macroeconomic variables. Emerging countries like Brazil show expressive trend dynamics that can blur the vectors determining real business cycles, but most models cannot consider this additional complexity, and so they usually throw out meaningful dynamics of scarce data. Our basic DSGE model cares for the raw data dynamics and aims to disentangle endogenously trends and cycles and unveil the underlying growth vectors. Thereby, historical interpretation and forecasts can hold internal consistency, which improves storytelling and calls for an in-depth forecasting. We report model evaluation summaries to support fully integrated models as a highly valuable tool for applied macro exercises and policy advising. Yet, we present an application for the measurement of potential output and the output gap.

Date: 2016-05
New Economics Papers: this item is included in nep-dge and nep-mac
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Citations: View citations in EconPapers (5)

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