Estimating a DSGE Model with Limited Asset Market Participation for the Euro Area

Model Uncertainty, Limited Market Participation, and Asset Prices

We demonstrate that limited market participation can arise endogenously in the presence of model uncertainty. Our model generates novel predictions on the relation between limited market participation, the equity premium, and the diversification discount. When the dispersion in investors’ model uncertainty is small, full market participation prevails in equilibrium. In this case, the equity pre...

Does Interbank Market Matter for Business Cycle Fluctuation? An Estimated DSGE Model with Financial Frictions for the Euro Area

The aim of this paper is to assess the impact of the interbank market on the business cycle. To do that, we built a DSGE model with heterogeneous households and banks. Net lender banks can allocate their resources between interbank lending and risk free government bonds. This portfolio choice is affected by an exogenous counterpart risk shock on the interbank market. An increase of the counterp...

A Two-Pillar DSGE Monetary Policy Model for the Euro Area

Whereas the bulk of the literature on DSGE models provides a rationale for in‡ation targeting strategies, there is no model doing such a job for the strategy implemented for almost ten years now by the Eurosystem and known as the "two-pillar monetary policy strategy". We try to address this issue by developping a small "two-pillar" DSGE model for the euro area. In this paper: 1) we allow real b...

Performance of A Limited Area Model For The Simulation of Western Disturbances

Stock Market Bubbles and Business Cycles: A DSGE Model for the Iranian Economy

T his paper investigates the movement between stock market bubbles and fluctuations in aggregate variables within a DSGE model for the Iranian economy. We apply a new Keynesian monetary framework with nominal rigidity in wages and prices based on the study by Ikeda (2013), which is developed with appropriate framework for the Iranian economy. We consider central bank behavior differe...