This paper develops a Dynamic Stochastic General Equilibrium (DSGE) framework to evaluate the relative importance of the easing of lending and borrowing constraints in mortgage credit markets for business cycle fluctuations in small open emerging economies. Credit markets are characterized by...

There are many indications that formal methods are not used to their full potential by central banks today. In this paper we demonstrate how BVAR and DSGE models can be used to shed light on questions that policy makers deal with in practice using data from Sweden. We compare the forecast...

We develop a two-country New Keynesian model with sticky local currency pricing,distribution costs and a demand elasticity increasing with the relative price. These features help to reduce the exchange rate pass-through to import price at the border and down the chain towards consumption price,...

In this paper, we propose a DSGE model with the term structure of interest rates drawing on the framework introduced by Andrés et al. (2004) and Marzo et al. (2008). In particular, we reproduce segmentation in financial markets by introducing bonds of different maturities and bond adjustment...

We compare real-time density forecasts for the euro area using three DSGE models. The benchmark is the Smets-Wouters model and its forecasts of real GDP growth and inflation are compared with those from two extensions. The first adds financial frictions and expands the observables to include a...

DSGE (Dynamic stochastic general equilibrium) models are the common workhorse of modern macroeconomic theory. Whereas story-telling and policy analysis were in the forefront of applications since its inception, the forecasting perspective of DSGE models is only recently topical. In this study,...

The paper provides estimates of the euro-area output gap, based on a relatively standard medium scale DSGE model estimated recursively with Bayesian techniques over the period 1985-2016. The main findings can be summarized as follows. First, our measure of output gap identifies episodes of...

Presently there is growing interest in dynamic stochastic general equilibrium (DSGE) models that have more parameters, endogenous variables, exogenous shocks, and observables than the Smets and Wouters (2007) model, and substantial additional complexities from non-Gaussian distributions and the...

The Swedish economy is strongly dependent on global economic developments, which is re ected in generally strong empirical relationships between Swedish and foreign macroeconomic variables. It is, however, diffi cult for standard open-economy dynamic stochastic general equilibrium (DSGE) models...

The business cycle is alive and well, and real variables respond to it more or less as they always did. Witness the Great Recession. In ation, in contrast, has gone quiescent. This paper studies the sources of this disconnect using VARs and an estimated DSGE model. It finds that the disconnect...