A Baseline Model for Monetary Policy Analysis

The paper deals with a baseline New Keynesian DSGE model for a closed economy. The model follows the concept of the New Open Economy Macroeconomics based on microeconomic foundations enriched with real and nominal rigidities. It is estimated with Bayesian technique using quarterly Eurozone data. The estimation results are discussed and compared with related papers. Via impulse responses to unanticipated shocks, we analyze the behaviour of the model without any rigidities in order to understand essential model mechanisms. Then, we add separately real and nominal rigidities to investigate their impacts within the model.