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DSGE modelling for the UK economy 1974–2017
Author(s) -
Litsios Ioannis,
Pilbeam Keith,
Asteriou Dimitrios
Publication year - 2021
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/boer.12255
Subject(s) - dynamic stochastic general equilibrium , economics , business cycle , replicate , new keynesian economics , shock (circulatory) , wage , flexibility (engineering) , small open economy , econometrics , price setting , macroeconomics , monetary policy , keynesian economics , technology shock , monetary economics , microeconomics , labour economics , statistics , mathematics , management , medicine
We build four different dynamic stochastic general equilibrium (DSGE) models for a small open economy reflecting both neoclassical and Keynesian specifications. A DSGE model with full price and wage flexibility is initially constructed and then modified through nominal wage and price rigidities. The ability of the models to replicate important features of the business cycle activity in the UK is explored through statistical and econometric analysis. Evidence suggests that a monetary shock under the Taylor model with price stickiness can replicate a significant portion of the business cycle activity in the UK economy.