Publication details

Czech and Slovak economy during the Great Recession through the lens of a DSGE model

Authors

TVRZ Stanislav

Year of publication 2014
Type Article in Proceedings
Conference Proceedings of the 5th International Scientific Conference Economic Theory & Economic Reality ETER 2014
MU Faculty or unit

Faculty of Economics and Administration

Citation
Web conference proceedings
Field Economy
Keywords DSGE model; Great Recession; monetary union; time-varying parameters; particle filter
Attached files
Description In this paper, we compare the changes in the structure and behaviour of the Czech and Slovak economy in a turbulent period of the Great recession and subsequent return to the long-run growth equilibrium. While the structure of both economies is very similar, there are also important differences that became more pronounced during the recession period, when Slovakia entered the euro area. It is our goal to identify the most important changes in behaviour and underlying structure of the two economies and to outline the implications for further development. Both small open economies are represented by nonlinear dynamic stochastic model of a general equilibrium with financial accelerator. In order to capture the Slovak accession to the euro area, deterministic regime switch is implemented in the model of the Slovak economy. The development of the time-varying structural parameters is identified using the second order approximation of a nonlinear DSGE model. The model is estimated with the use of Bayesian methods, and in particular, nonlinear particle filter.
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