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Output gap in the Czech economy: DSGE approach

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  • Bechný Jakub

    (Masaryk University, Faculty of Economics and Administration, Department of Economics, Lipová 41a, 602 00Brno, Czech Republic)

Abstract

This paper presents three measures of the output gap estimated by a dynamic stochastic general equilibrium model of the Czech economy. We argue that the most plausible description of the business cycle provides the output gap defined as a deviation from a flexible price level of output, which is generated solely by permanent growth shocks. Our model shows that 2006-2008 overheating of the economy and the following 2008-2009 slump can be largely attributed to development in a world economy and export and import sectors, while the 2012-2013 recession was caused mainly by a combination of adverse domestic demand and cost shocks.

Suggested Citation

  • Bechný Jakub, 2019. "Output gap in the Czech economy: DSGE approach," Review of Economic Perspectives, Sciendo, vol. 19(2), pages 137-156, June.
    • Handle: RePEc:vrs:reoecp:v:19:y:2019:i:2:p:137-156:n:4
    DOI: 10.2478/revecp-2019-0008
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    References listed on IDEAS

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    More about this item

    Keywords

    DSGE model; labour market; output gap; small open economy;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications

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