Changes in nominal rigidities in Poland – a regime switching DSGE perspective

Pawel Baranowski and Zbigniew Kuchta

MPRA Paper from University Library of Munich, Germany

Abstract: We estimate a dynamic stochastic general equilibrium model that allows for regimes Markov switching (MS-DSGE). Existing MS-DSGE papers for the United States focus on changes in monetary policy or shocks volatility, contributing the debate on the Great Moderation and/or Volcker disinflation. However, Poland which here serves as an example of a transition country, faced a wider range of structural changes, including long disinflation, EU accession or tax changes. The model identifies high and low rigidity regimes, with the timing consistent with menu cost explanation of nominal rigidities. Estimated timing of the regimes captures the European Union accession and indirect tax changes. The Bayesian model comparison results suggest that model with switching in both analyzed rigidities is strongly favored by the data in comparison with switching only in prices or in wages. Moreover, we find significant evidence in support of independent Markov chains.

Keywords: nominal rigidities; Markov-switching DSGE models; Bayesian model comparison; regime switching (search for similar items in EconPapers)
JEL-codes: C11 E31 E32 J30 P22 (search for similar items in EconPapers)
Date: 2015-12, Revised 2016-03
New Economics Papers: this item is included in nep-dge, nep-eec, nep-mac, nep-ore and nep-tra
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Related works:
Working Paper: Changes in nominal rigidities in Poland - a regime switching DSGE perspective (2016)
Working Paper: Changes in nominal rigidities in Poland – a regime switching DSGE perspective (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:70573

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