Prague Economic Papers 2016, 25(1):37-52 | DOI: 10.18267/j.pep.535

Structural Changes in the Czech Economy: A DSGE Model Approach

Jan Čapek
Faculty of Economics and Administration, Masaryk University, Brno, Czech Republic (capek@econ.muni.cz).

This article identifies structural changes in the Czech economy in the period from 1996 to 2012 using a DSGE model estimated using Bayesian methods. A structural change is understood as a statistically significant change in model parameter(s).

Prior to the first quarter of 1999, there was a structural change that can be primarily attributed to shocks impacting only the domestic economy, and to the domestic monetary authority's increased preferences towards inflation and exchange rate growth. The elasticity of substitution between domestic and imported consumption goods also increased sharply in this period. As far as the recent economic recession is concerned, it was caused by a much more persistent worldwide technology shock. Habit formation dropped abruptly during the crisis as households tended not to smooth their consumption much anymore.

Recursive impulse response analysis carried out on the model suggests that the propagation mechanisms in the model economy changed, implying that the identified structural changes were accompanied by a change in behaviour of the model economy.

Keywords: structural change, rolling estimation, recursive impulse response, DSGE model, Bayesian estimation
JEL classification: C11, D58, E32

Published: January 1, 2016  Show citation

ACS AIP APA ASA Harvard Chicago Chicago Notes IEEE ISO690 MLA NLM Turabian Vancouver
Čapek, J. (2016). Structural Changes in the Czech Economy: A DSGE Model Approach. Prague Economic Papers, 25(1), 37-52. doi: 10.18267/j.pep.535
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. Benati, L., Surico, P. (2009). VAR Analysis and the Great Moderation. American Economic Review, 99(4), 1636-52, DOI: 10.1257/aer.99.4.1636 Go to original source...
    2. Benati, L. (2008a). Investigating Infl ation Persistence across Monetary Regimes. European Central Bank Working Paper Series 851.
    3. Benati, L. (2008b). The "Great Moderation" in the United Kingdom. Journal of Money, Credit and Banking, 40(1), 121-147, DOI: 10.1111/j.1538-4616.2008.00106.x Go to original source...
    4. Boivin, J., Giannoni, M. (2002). Assessing Changes in the Monetary Transmission Mechanism: A VAR Approach. Economic Policy Review, 8(1), 97-111.
    5. Bolotov, I., Čajka, R., Gajdušková, K. (2013). The Economic Balance of the Czech Republic and Slovakia during the Economic Crisis. Prague Economic Papers, 22(4), 504-523. Go to original source...
    6. Brooks, S. P., Gelman, A. (1998). General Methods for Monitoring Convergence of Iterative Simulations. Journal of Computational and Graphical Statistics, 7(4), 434-455, DOI: 10.1080/10618600.1998.10474787 Go to original source...
    7. Canova, F., Gambetti, L. (2009). Structural Changes in the US Economy: Is There a Role for Monetary Policy? Journal of Economic Dynamics and Control, 33(2), 477-490, DOI: 10.1016/j.jedc.2008.05.010 Go to original source...
    8. Canova, F. (2006). Monetary Policy and the Evolution of the US Economy. CEPR. Discussion Papers 5467.
    9. Canova, F. (2009). What Explains the Great Moderation in the U.S.? A Structural Analysis. Journal of the European Economic Association, 7(4), 697-721, DOI: 10.1162/JEEA.2009.7.4.697 Go to original source...
    10. Čapek, J. (2011). Changes in the Behavior of Economies in a DSGE Model in the Course of Time, in Skočdopolová, V., Dlouhý, M., ed., Mathematical Methods in Economics. Janská Dolina: Professional Publishing. September 6-9, pp. 94-100.
    11. Čapek, J. (2012). Comparison of Recursive Parameter Estimation and Non-linear Filtration. Mathematical Methods in Economics, September 11-13, 85-90.
    12. Čapek, J. (2014). Historical Analysis of Monetary Policy Reaction Functions: Do Real-Time Data Matter? Finance a úvěr, 64(6), 457-475.
    13. Čapek, J. (2015). Estimating DSGE Model Parameters in a Small Open Economy: Do Real-Time Data Matter? Národohospodářský obzor, 15(1), 89-114. DOI: 10.1515/revecp-2015-0001 Go to original source...
    14. Chow, G. (1960). Tests of Equality between Sets of Coefficients in Two Linear Regressions. Econometrica, 28(3), 591-605, DOI: 10.2307/1910133 Go to original source...
    15. Cogley, T., Sargent, T. J. (2001). Evolving post-World War II U.S. Inflation Dynamics, in NBER Macroeconomics Annual 2001, NBER Chapters, National Bureau of Economic Research, Inc, 16(1), pp. 331-388, DOI: 10.1162/088933601320225026 Go to original source...
    16. Cogley, T. (2008). Comment on "How Structural Are Structural Parameters?", in NBER Macroeconomics Annual 2007, NBER Chapters, National Bureau of Economic Research, Inc, 22, pp. 139-147. Go to original source...
    17. Fernández-Villaverde, J., Rubio-Ramírez, J. F. (2008). How Structural Are Structural Parameters?, in NBER Macroeconomics Annual 2007, NBER Chapters, National Bureau of Economic Research, Inc, 22, pp. 83-137. Go to original source...
    18. Jerger, J., Röhe, O. (2012). Testing for Parameter Stability in DSGE Models. The Cases of France, Germany, Italy, and Spain. International Economics and Economic Policy, 1-23.
    19. Lee, J. (2012). Are Structural Parameters of DSGE Models Stable in Korea? Journal of Asian Economics, 23(1), 50-59, DOI: 10.1016/j.asieco.2011.08.002 Go to original source...
    20. Lubik, T. A., Surico, P. (2010). The Lucas Critique and the Stability of Empirical Models. Journal of Applied Econometrics, 25(1), 177-194, DOI: 10.1002/jae.1129 Go to original source...
    21. Lubik, T., Schorfheide, F. (2006). A Bayesian Look at the New Open Economy Macroeconomics, in NBER Macroeconomics Annual 2005, NBER Chapters, National Bureau of Economic Research, Inc, 20, p. 313-382. Go to original source...
    22. Pivetta, F., Reis, R. (2007). The Persistence of Infl ation in the United States. Journal of Economic Dynamics and Control, 31(4), 1326-1358, DOI: 10.1016/j.jedc.2006.05.001 Go to original source...
    23. Rubio-Ramírez, J. F., Waggoner, D., Zha, T. (2005). Markov-Switching Structural Vector Autoregressions: Theory and Application. Federal Reserve Bank of Atlanta. Working Paper No. 27. Go to original source...
    24. Schorfheide, F. (2008). Comment on "How Structural Are Structural Parameters?", in NBER Macroeconomics Annual 2007, NBER Chapters, National Bureau of Economic Research, Inc, 22, pp. 149-163. Go to original source...
    25. Spěváček, V. (2013). Growth and Stability of the Czech Economy in the Years 2001-2011. Politická ekonomie, 61(1), 24-45. Go to original source...
    26. Tonner, J., Polanský, J., Vašíček, O. (2011). Parameter Drifting in a DSGE Model Estimated on Czech Data. Finance a úvěr, 61(5), 510-524.

    This is an open access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY NC ND 4.0), which permits non-comercial use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content