Two Orthogonal Continents? Testing a Two-country DSGE Model of the US and EU Using Indirect Inference

A. Patrick Minford, Michael Wickens, David Meenagh and Vo Phuong Mai Le

No 7385, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We examine a two country model of the EU and the US. Each has a small sector of the labour and product markets in which there is wage/price rigidity, but otherwise enjoys flexible wages and prices with a one quarter information lag. Using a VAR to represent the data, we find the model as a whole is rejected. However it is accepted for real variables, output and the real exchange rate, suggesting mis-specification lies in monetary relationships. The model highlights a lack of spillovers between the US and the EU.

Keywords: Bootstrap; Dsge; indirect inference; New classical; New keynesian; Open economy model; Var; Wald statistic (search for similar items in EconPapers)
JEL-codes: C12 C32 C52 E1 (search for similar items in EconPapers)
Date: 2009-07
New Economics Papers: this item is included in nep-cba, nep-dge, nep-eec and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Related works:
Journal Article: Two Orthogonal Continents? Testing a Two-country DSGE Model of the US and the EU Using Indirect Inference (2010)
Working Paper: Two Orthogonal Continents: Testing a Two-country DSGE Model of the US and EU Using Indirect Inference (2009)
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