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MOISE: A DSGE Model for the Israeli Economy

Author

Listed:
  • Eyal Argov

    (Bank of Israel)

  • Emanuel Barnea

    (Bank of Israel)

  • Alon Binyamini

    (Bank of Israel)

  • Eliezer Borenstein

    (Bank of Israel)

  • David Elkayam

    (Bank of Israel)

  • Irit Rozenshtrom

    (Bank of Israel)

Abstract

This paper presents a medium-scale micro-founded model with real and nominal imperfections, named "MOISE" (MOdel for the ISraeli Economy). The model was developed at the Bank of Israel to support monetary policy formulation, and builds on similar models in wide use among central banks. It includes extensions and modications that reect the special characteristics of the Israeli economy and are intended to improve the models t to Israeli data. The model was estimated using the increasingly popular Bayesian approach, using Israeli data for 1992:Q1 to 2009:Q4. The models t was tested using two criteria: the momentst and in-sample forecast performance. Finally, the paper presents and analyzes the models properties using impulse response functions and variance decomposition.

Suggested Citation

  • Eyal Argov & Emanuel Barnea & Alon Binyamini & Eliezer Borenstein & David Elkayam & Irit Rozenshtrom, 2012. "MOISE: A DSGE Model for the Israeli Economy," Bank of Israel Working Papers 2012.06, Bank of Israel.
    • Handle: RePEc:boi:wpaper:2012.06
    as

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    References listed on IDEAS

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    Cited by:

    1. Lawrence J. Christiano & Martin S. Eichenbaum & Mathias Trabandt, 2018. "On DSGE Models," Journal of Economic Perspectives, American Economic Association, vol. 32(3), pages 113-140, Summer.
    2. Eyal Argov & Alon Binyamini & Eliezer Borenstein & Irit Rozenshtrom, 2012. "Ex-Post Evaluation of Monetary Policy," Bank of Israel Working Papers 2012.07, Bank of Israel.
    3. Eyal Argov & Alon Binyamini & Eliezer Borenstein & Irit Rozenshtrom, 2015. "Model-Based Ex Post Evaluation of Monetary Policy," International Journal of Central Banking, International Journal of Central Banking, vol. 11(4), pages 219-254, December.
    4. Sigal Ribon, 2023. "Differential Effects of Monetary Policy on Household Consumption: The Case of Israel," Israel Economic Review, Bank of Israel, vol. 21(1), pages 35-73, March.
    5. Guy Segal, 2017. "To Respond or Not to Respond: Measures of the Output Gap in Theory and in Practice," International Journal of Central Banking, International Journal of Central Banking, vol. 13(2), pages 73-120, June.
    6. Kobi Braude & Karnit Flug, 2012. "The interaction between monetary and fiscal policy: insights from two business cycles in Israel," BIS Papers chapters, in: Bank for International Settlements (ed.), Fiscal policy, public debt and monetary policy in emerging market economies, volume 67, pages 205-215, Bank for International Settlements.
    7. Kazinnik, Sophia & Papell, David H., 2021. "Monetary policy rules in practice: The case of Israel," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 308-320.
    8. Benchimol, Jonathan, 2016. "Money and monetary policy in Israel during the last decade," Journal of Policy Modeling, Elsevier, vol. 38(1), pages 103-124.
    9. Ilek, Alex & Rozenshtrom, Irit, 2018. "The term premium in a small open economy: A micro-founded approach," International Review of Economics & Finance, Elsevier, vol. 57(C), pages 333-352.
    10. Michael Gurkov & Osnat Zohar, 2022. "Inflation Risks in Israel," Bank of Israel Working Papers 2022.19, Bank of Israel.
    11. Francesco Sergi, 2018. "DSGE Models and the Lucas Critique. A Historical Appraisal," Working Papers 20181806, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    12. Ágeir Daníelsson & Lúdvík Elíasson & Magnús F. Gudmundsson & Björn A. Hauksson & Ragnhildur Jónsdóttir & Thorvardur Tjörvi Ólafsson & Thórarinn G. Pétursson, 2006. "QMM A Quarterly Macroeconomic Model of the Icelandic Economy," Economics wp32, Department of Economics, Central bank of Iceland.
    13. Malikane, Christopher & Ojah, Kalu, 2014. "Fisher's Relation and the Term Structure: Implications for IS Curves," MPRA Paper 55553, University Library of Munich, Germany.
    14. Francesco Sergi, 2015. "L'histoire (faussement) naïve des modèles DSGE," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01222798, HAL.
    15. Copaciu, Mihai & Nalban, Valeriu & Bulete, Cristian, 2015. "R.E.M. 2.0, An estimated DSGE model for Romania," Dynare Working Papers 48, CEPREMAP.
    16. David Elkayam & Guy Segal, 2018. "Estimated Natural Rate of Interest in an Open Economy: The Case of Israel," Bank of Israel Working Papers 2018.05, Bank of Israel.
    17. Ásgeir Daníelsson & Lúdvik Elíasson & Magnús F. Gudmundsson & Svava J. Haraldsdóttir & Lilja S. Kro & Thórarinn G. Pétursson & Thorsteinn S. Sveinsson, 2019. "QMM A Quarterly Macroeconomic Model of the Icelandic Economy Version 4.0," Economics wp82, Department of Economics, Central bank of Iceland.
    18. Aleksandra Babii, 2019. "Exchange Rates Co-movement and International Trade," 2019 Meeting Papers 1150, Society for Economic Dynamics.
    19. Alba, Joseph D. & Liu, Jingting & Chia, Wai-Mun & Park, Donghyun, 2020. "Foreign output shock in small open economies: A welfare evaluation of monetary policy regimes," Economic Modelling, Elsevier, vol. 86(C), pages 101-116.
    20. Francesco Sergi, 2015. "L'histoire (faussement) naïve des modèles DSGE," Documents de travail du Centre d'Economie de la Sorbonne 15066, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    21. Alon Binyamini, 2013. "Labor Market Frictions and Optimal Monetary Policy," Bank of Israel Working Papers 2013.02, Bank of Israel.

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    More about this item

    Keywords

    DSGE; Open Economy Macroeconomics; Bayesian Analysis; Forecasting; Business cycles; Models and Applications; Israel;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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