Financial frictions during the period of the global economic recession: A DSGE model of the Czech economy

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Authors

FRYBLÍK Pavel VAŠÍČEK Osvald

Year of publication 2011
Type Article in Proceedings
Conference Proceedings of the 29th International Conference on Mathematical Methods in Economics 2011
MU Faculty or unit

Faculty of Economics and Administration

Citation
Field Economy
Keywords DSGE model; Small Open Economy; Financial Friction; Financial Accelerator; Bayesian Estimation
Description This paper deals with analysis of financial market frictions of Czech economy using DSGE model framework. The methodology is borrowed from Alpanda, Koetze, Woglom (2010) who based their model on Justiniano, Preston (2009) and specifics of the financial market during global economic crisis are examined. This model features staggered wages and prices, incomplete pass-through of exchange rate and incomplete international asset markets. Czech economy from year 1996 till the end of 2010 is analyzed by DSGE model with financial accelerator using shock decompositions. This gives us a prove about impact of risk premium and financial accelerator on the output. Furthermore, it determines also effect of shocks on observed variables. The method of recursive estimations is used. Thus, we are able to study quantity of financial accelerator and other parameters which are now changing across the time. Those parameters change the structure of model and influence development of the economy.
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