AN ANALYSIS OF DOMESTIC AND EXTERNAL SHOCKS ON ROMANIAN ECONOMY USING A DSGE MODEL

by Caraiani, Petre
Published in Romanian Journal of Economic Forecasting
, 2008, volume 9 issue 3, 100-114

 Requires a PDF viewer such as Xpdf or Adobe Acrobat Reader
 280
Kb

Abstract

In this paper, I study the impact of the domestic and external shocks on the Romanian economy. I use an open economy DSGE model and estimate it for the Romanian economy using Bayesian techniques. The impact of the domestic shocks is moderate but not persistent. The Euro Area demand and interest rate shocks have a moderate impact on the domestic output. The Euro Area supply and interest rate shocks have significant and persistent impacts on the domestic inflation. I also perform a long-run variance decomposition of the domestic variables.

Keywords: DSGE models, small open economy, Romania, Euro Area, monetary policy.
JEL Classification:
C11, E40, F41