Quotation Breuss, Fritz, Fornero, Jorge Alberto. 2009. An estimated DSGE model of Austria, the Euro Area and the U.S.: some welfare implications of EMU. EI Working Paper, No. 81, Europainstitut, WU-Wien, May 2009.


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Abstract

We build a fully microfounded dynamic stochastic general equilibrium (DSGE) model, which is estimated employing Bayesian methods. The model captues the most salient features of Austria as a small open economy, the Euro Area (EA) and the United States (US). Further analysis is conducted through numerical simulations to examine how nominal and ral shocks are propagated. Besides, welfare costs of nominal rigidities are calculated. We distinguish two sample periods. 'pre-EMU' and 'EMU'. In the former, we maintain the assumption of full commitment of respective (independent) Central Banks towards their monetary rules, whereas in the latter, the monetary policy of Austria is fully aligned with the European Central Bank. Main results are derived from Bayesian estimation and simulation of the estimated model. Welfare calculations from the estimated model suggest that in the pre-EMU period, the EA and Austria present welfare costs close to one percent of steady-state consumption, whereas the U.S. welfare costs are slightly higher (-1.52 percent). As it would be expected, in the second subsample welfare costs in the EA decrease, indicating an improvement in the allocation during the EMU regime (similarly in the U.S.), whereas in Austria welfare costs go up.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Working/discussion paper, preprint
Language English
Title An estimated DSGE model of Austria, the Euro Area and the U.S.: some welfare implications of EMU
Title of whole publication EI Working Paper, No. 81, Europainstitut, WU-Wien, May 2009
Year 2009
URL http://www.wu.ac.at/wuw/institute/europainstitut/pub/workingpaper/index

Associations

People
Breuss, Fritz (Details)
Fornero, Jorge Alberto (Former researcher)
Organization
Institute for International Economics IN (Details)
Europainstitut (Badinger) (Former organization)
Research areas (Ă–STAT Classification 'Statistik Austria')
5115 European integration (Details)
5300 Economics (Details)
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