Both from theoretical and practical viewpoints, I argue that the New Keynesian model's forward-looking IS curve should be derived by quadratic approximation. This leaves uncertainty in the basic three-equation model. After adding exogenous AR(1) processes, I examine the results by numerical...

We construct a new-Keynesian DSGE model tailored to the Netherlands and interpret it as a multivariate unobserved components model. We identify three major stochastic trends in the data — trends in general - purpose technology, investment-specific technology, and labor supply — and model...

We propose a method to incorporate information from Dynamic Stochastic General Equilibrium (DSGE) models into Dynamic Factor Analysis. The method combines a procedure previously applied for Bayesian Vector Autoregressions and a Gibbs Sampling approach for Dynamic Factor Models. The factors in...

This chapter provides an overview of and user's guide to dynamic factor models (DFMs), their estimation, and their uses in empirical macroeconomics. It also surveys recent developments in methods for identifying and estimating SVARs, an area that has seen important developments over the past 15...

Policy simulations for national economies with econometric models in general are done using a stand alone national model with exogenous export values and import prices. In a globalised world such an exercise is critical, since the policy in question may change the export prices and the import...

The Global Integrated Monetary and Fiscal model (GIMF) is a multi-region, forward-looking, DSGE model developed by the Economic Modeling Division of the IMF for policy analysis and international economic research. Using a 5-region version of the GIMF, this paper illustrates the model's...

To analyse the interdependence between monetary and fiscal policy during a financial crisis, we develop an open-economy DSGE model with monetary and fiscal policy as well as financial markets in a continuous-time framework based on stochastic differential equations. Monetary policy is modelled...

This paper analyses the main drivers of sovereign bond spreads in a globalised world. Specifically, we account for international spillovers of bond spreads by adding an additional driver, namely, financial markets, and allowing interactions across countries and markets. We contribute to the VAR...

I study how the zero bound on nominal interest rates affects optimal discretionary monetary policy within the standard New Keynesian framework. I find that the non-negativity constraint implies an optimal policy which is more expansionary and more aggressive near the zero bound compared to the...

Separately, news and sunspot shocks have been shown empirically to be determinants of changes in expectations. This paper considers both of them together in a simple New Keynesian monetary business cycle model. A full set of rational expectations solutions is derived analytically. The analytical...