Publication details

DSGE model with collateral constraint: estimation on Czech data


HLOUŠEK Miroslav

Year of publication 2012
Type Article in Proceedings
Conference Proceedings of 30th International Conference Mathematical Methods in Economics
MU Faculty or unit

Faculty of Economics and Administration

Field Economy
Keywords collateral constraint;housing; DSGE model; Bayesian estimation
Attached files
Description Czech data shows positive comovement of house prices and consumption in reaction to house price shock. This behavior can be explained by collateral effect when houses serve as collateral for credit constrained households. This type of friction is present in the Dynamic Stochastic General Equilibrium (DSGE) model from Iacoviello (2005) which is slightly modified and estimated on Czech data using Bayesian techniques. The estimated parameters are economically interpreted and ability of the model to match moments in data is assessed. Situation when houses are not collateralizable is examined. This exercise shows that the collateral effect is necessary feature of the model to deliver positive reaction of consumption to house price shock.

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