An Estimated Dynamic Stochastic General Equilibrium Model of the Jordanian Economy

Tigran Poghosyan and Samya Beidas-Strom

No 2011/028, IMF Working Papers from International Monetary Fund

Abstract: This paper presents and estimates a small open economy dynamic stochastic general-equilibrium model (DSGE) for the Jordanian economy. The model features nominal and real rigidities, imperfect competition and habit formation in the consumer’s utility function. Oil imports are explicitly modeled in the consumption basket and domestic production. Bayesian estimation methods are employed on quarterly Jordanian data. The model’s properties are described by impulse response analysis of identified structural shocks pertinent to the economy. These properties assess the effectiveness of the pegged exchange rate regime in minimizing inflation and output trade-offs. The estimates of the structural parameters fall within plausible ranges, and simulation results suggest that while the peg amplifies output, consumption and (price and wage) inflation volatility, it offers a relatively low risk premium.

Keywords: WP; interest rate; exchange rate (search for similar items in EconPapers)
Pages: 51
Date: 2011-02-01
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Citations: View citations in EconPapers (17)

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