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A DSGE Model with Financial Dollarization – the Case of Serbia

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  • Mirko Ðukic, Tibor Hlédik, Jirí Polanský, Ljubica Trajcev and Jan Vlcek
  • Mirko Ðukic

    (National Bank of Serbia)

  • Tibor Hlédik

    (Czech National Bank)

  • Jirí Polanský

    (Czech National Bank)

  • Ljubica Trajcev

    (National Bank of Serbia)

  • Jan Vlcek

    (Czech National Bank)

Abstract

We modify a DSGE model of a small open economy by adding financial euroization in order to capture the main channels of the monetary transmission mechanism in matching with the Serbian data. In contrast to the standard DSGE workhorse, the model encompasses commercial banks and foreign exchange-denominated deposits and loans. Given these features, the model is well-suited to evaluating effects of the nominal exchange rate on the financial wealth and consumption of households. The model structure, including optimization problems and first-order conditions, is provided in the paper. The model properties are tested to match the stylized facts of dollarized economies. Specifically, the model is calibrated to the Serbian data, and a model-consistent multivariate filter is used to identify unobserved trends and gaps.

Suggested Citation

  • Mirko Ðukic, Tibor Hlédik, Jirí Polanský, Ljubica Trajcev and Jan Vlcek & Mirko Ðukic & Tibor Hlédik & Jirí Polanský & Ljubica Trajcev & Jan Vlcek, 2021. "A DSGE Model with Financial Dollarization – the Case of Serbia," Working Papers Bulletin 3, National Bank of Serbia.
    • Handle: RePEc:nsb:bilten:3
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    Cited by:

    1. Karel Musil & Mikhail Pranovich & Mr. Jan Vlcek, 2018. "Structural Quarterly Projection Model for Belarus," IMF Working Papers 2018/254, International Monetary Fund.

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    More about this item

    Keywords

    DSGE model; financial dollarization;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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