We estimate the dynamic stochastic general equilibrium model of Christiano, Eichenbaum, and Evans (2005) on United Kingdom data. Our estimates suggest that price stickiness is a more important source of nominal rigidity in the U.K. than wage stickiness. Our estimates of parameters governing investment behavior are only well behaved when post-1979 observations are included, which reflects govern...

This paper discusses whether the parameter invariance problem as in Lucas (1976) applies to the standard new Keynesian DSGE model when the credit channel is left out from its structure. We simulate a …nancial crisis in which the credit market friction is positive and we shift the monetary policy to stimulate the economy. We evaluate the cost of omitting the credit channel by examining the chang...

In this paper, it is argued that the observed high positive correlation between national savings and investment which is found in the data can in part be explained by shocks to monetary policy. This hypothesis, which is established by reviewing some empirical findings, is tested in a two-country DSGE-model framework in the tradition of the New Open Economy Macroeconomics. The simulation results...

The relation between macroeconomic fundamentals and the cross section of asset returns is studied through the lens of dynamic stochastic general equilibrium (DSGE) models. We provide a full-information Bayesian estimation of the model using seven macroeconomic variables and extract the time series of three fundamental shocks to the economy for the period of 1966Q1-2010Q3: neutral technology (NT...

This paper estimates the parameters of a stylized dynamic stochastic general equilibrium model using maximum likelihood and Bayesian methods, paying special attention to the issue of weak parameter identification. Given the model and the available data, the posterior estimates of the weakly identified parameters are very sensitive to the choice of priors. We provide a set of tools to diagnose w...

We provide a comprehensive assessment of the predictive power combinations dynamic stochastic general equilibrium (DSGE) models for GDP growth, inflation, and interest rate in euro area. employ battery static pooling weights based on Bayesian model averaging principles, prediction pools, factor representations, entertain six different DSGE specifications five weighting schemes. Our results indi...