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Habit Formation, Price Indexation and Wage Indexation in the DSGE Model: Specification, Estimation and Model Fit

The result's identifiers

  • Result code in IS VaVaI

    <a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216224%3A14560%2F11%3A00052649" target="_blank" >RIV/00216224:14560/11:00052649 - isvavai.cz</a>

  • Result on the web

  • DOI - Digital Object Identifier

Alternative languages

  • Result language

    angličtina

  • Original language name

    Habit Formation, Price Indexation and Wage Indexation in the DSGE Model: Specification, Estimation and Model Fit

  • Original language description

    In order to determine which specification provides better fit of the data, this paper presents several specifications of a closed economy DSGE model with nominal rigidities. The goal of this paper is to find out whether some characteristics widely used in New Keynesian DSGE models, such as habit formation in consumption, price indexation and wage indexation, provide better fit of the macroeconomic data. Model specifications are estimated on the data of the US economy and Euro Area 12 economy, using Bayesian techniques, particularly the Metropolis Hastings algorithm. The data fit measure is a Bayes factor calculated from marginal likelihoods. Results suggest that including habit formation in consumption significantly improves the empirical data fit of the model, whereas including partial price indexation and partial wage indexation does not improve the empirical data fit of the model. Variants with full price indexation and full wage indexation were the worst ones concerning their data

  • Czech name

  • Czech description

Classification

  • Type

    J<sub>x</sub> - Unclassified - Peer-reviewed scientific article (Jimp, Jsc and Jost)

  • CEP classification

    AH - Economics

  • OECD FORD branch

Result continuities

  • Project

    <a href="/en/project/1M0524" target="_blank" >1M0524: Research center on competitiveness of Czech economy</a><br>

  • Continuities

    P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)<br>S - Specificky vyzkum na vysokych skolach

Others

  • Publication year

    2011

  • Confidentiality

    S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Data specific for result type

  • Name of the periodical

    Národohospodářský obzor ? Review of Economic Perspectives

  • ISSN

    1213-2446

  • e-ISSN

  • Volume of the periodical

    11

  • Issue of the periodical within the volume

    2

  • Country of publishing house

    CZ - CZECH REPUBLIC

  • Number of pages

    23

  • Pages from-to

    71-92

  • UT code for WoS article

  • EID of the result in the Scopus database