Opting for structural or reduced form estimation is often hard to justify if one wants to both learn about the structure of the economy and obtain accurate predictions. In this paper, we show that using both structural and reduced form estimates simultaneously can lead to more accurate policy...

We study optimal monetary policy for a small open economy in a model where both inflation and output show persistence. We incorporate habit formation into intertemporal consumption decision and modify the Calvo price setting to include indexation to past inflation. The message conveyed from this...

Over the last years, the business cycles of the Spanish economy have been analyzed from different points of view. Under the paradigm of the real business cycles, the standard model has been extended in several dimensions. However, none of them have taken into account the fact that in this...

This paper assesses the empirical desirability of the East Asian economies to form a monetary union. The Structural Vector Autoregression (VAR) method is employed to assess the nature of macroeconomic disturbances among the East Asian countries, as a preliminary guide in identifying potential...

The paper analyses the impact of structural reforms on external positions in monetary union in a 3-region version of QUEST III. Wage cost moderation and fiscal consolidation improve the current account balance in the medium term, but positive income effects tend to offset the initial increase in...

The paper uses the QUEST III model to analyse the question of whether nontradable (service) sector reform would reduce external imbalances in monetary union, notably from the side of surplus countries. It considers an open economy with a positive net foreign asset (net creditor) position and...

We show that the preferences suggested by Greenwood, Hercowitz and Huffman (GHH), which are quite common in real business cycle (RBC) models of small open economies, are not suited for reproducing both the business cycle and the equity premium facts of a small open economy. We show that by...

Using the Bayesian approach, a small open economy DSGE model was estimated using a sample of quarterly data for three Central and Eastern Europe economies, Czech Republic, Hungary and Poland. The hypothesis that central banks react to exchange rate movements was tested using posterior odds...

Considering that monetary policy instability may cause indeterminacy of the macroeconomic equilibrium, this paper derives the boundary condition between determinacy and indeterminacy in a small open economy DSGE model, and then uses this model to investigate China's monetary policy and...