HLOUŠEK, Miroslav. Zero lower bound on interest rate: application of DSGE model on Czech economy. In Talašová, J., Stoklasa, J., Talášek, T.. Proceedings of 32nd International Conference Mathematical Methods in Economics. Olomouc: Palacký University, 2014. p. 293-298, 6 pp. ISBN 978-80-244-4209-9.
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Original name Zero lower bound on interest rate: application of DSGE model on Czech economy
Authors HLOUŠEK, Miroslav (203 Czech Republic, guarantor, belonging to the institution).
Edition Olomouc, Proceedings of 32nd International Conference Mathematical Methods in Economics, p. 293-298, 6 pp. 2014.
Publisher Palacký University
Other information
Original language English
Type of outcome Proceedings paper
Field of Study 5.2 Economics and Business
Country of publisher Czech Republic
Confidentiality degree is not subject to a state or trade secret
Publication form storage medium (CD, DVD, flash disk)
WWW Conference proceedings
RIV identification code RIV/00216224:14560/14:00076454
Organization unit Faculty of Economics and Administration
ISBN 978-80-244-4209-9
Keywords in English zero lower bound on interest rate; DSGE model; occasionally binding constraint
Tags International impact, Reviewed
Changed by Changed by: Ing. Miroslav Hloušek, Ph.D., učo 21886. Changed: 16/9/2014 17:07.
Abstract
This paper deals with impacts of zero lower bound of interest rate on behaviour of macroeconomic variables in the Czech economy. The analysis uses DSGE model of small open economy, concretely model from Justiniano and Preston (2004), and toolkit from Guerrieri and Iacoviello (2014) that is able to solve occasionally binding constraint. The model is estimated on data of the Czech economy covering period 1996:Q2 -- 2013:Q4. The behaviour of the model is studied using impulse responses and simulations in reaction to model specific shocks. Situation when central bank is incapable to decrease interest rate because of zero lower bound has implications for behaviour of output and consumption but not inflation. Shocks that cause binding of interest rate for most periods are domestic cost-push shock and foreign preference shock. These two shocks also have non-negligible welfare implications regarding behaviour of consumption. In reaction to three standard deviations of innovations, the drop of consumption was larger by 0.9 and 0.5 percentage points, respectively, when the interest rate hit the zero lower bound.
Links
MUNI/A/0775/2013, internal MU codeName: Analýza chování ekonomiky během hospodářského cyklu pomocí dynamických modelů
Investor: Masaryk University, Grant Agency of Masaryk University, Category A
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