Constructing a Small-Region DSGE Model | Zendy

Kenichi Tamegawa | Zendy

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Constructing a Small-Region DSGE Model

Author(s) -

Kenichi Tamegawa

Publication year - 2013

Publication title -

isrn economics

Language(s) - English

Resource type - Journals

ISSN - 2090-8938

DOI - 10.1155/2013/825862

Subject(s) - dynamic stochastic general equilibrium , economics , investment (military) , small open economy , econometrics , general equilibrium theory , fiscal policy , macroeconomics , monetary policy , politics , political science , law

This paper constructs a tractable dynamic stochastic general equilibrium (DSGE) model of a regional economy that is considered small because it does not affect its national economy. To examine properties of our small-region DSGE model, we conduct several numerical simulations. Notably, fiscal expansion in our model is larger than that in standard DSGE models. This is because the increase in regional output does not raise interest rates, and this leads to the crowding-in effects of investment.

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