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Bayesian Estimation of Dynamic Stochastic General Equilibrium Model Using UK Data

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  • Kamal, Mona

Abstract

This paper applies the Bayesian method to estimate a Dynamic Stochastic General Equilibrium (DSGE) model using quarterly data for the UK over the period from 1971:Q1 through 2009:Q2. The contribution of the paper is two-fold. First, we estimate a model characterised by nominal and real frictions. This estimation allows us to recover the structural parameters of the economy and study the transmission mechanism of a government spending shock. Second, we investigate how the inclusion of fiscal policy rules affect the propagation of shocks and the ability of the model to fit the data. We establish that this inclusion enable the model to fit the data more closely. In addition, it has an impact on the qualitative responses of macroeconomic variables to the government spending shock.

Suggested Citation

  • Kamal, Mona, 2011. "Bayesian Estimation of Dynamic Stochastic General Equilibrium Model Using UK Data," MPRA Paper 28988, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:28988
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    More about this item

    Keywords

    The transmission mechanism of a government spending shock; Bayesian analysis; (DSGE)model.;
    All these keywords.

    JEL classification:

    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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