A-Non-Linear-New-Keynesian-Macroeconomic-Model-for-Bangladesh

Abstract

This monograph proposes a dynamic stochastic general equilibrium model for Bangladesh, which can be used for macroeconomic forecasting and monetary policy analysis. Consisting of New-Kenesaian linearized IS and Phillips curve equations, monetary policy rule, open economy equation, and exogenous shock processes, the model allows for nominal rigidities and slow adjustment processes among the representative agents. Following the derivation of the theoretical model, the state space VAR(1) and Ar(1) processes are followed to calibrate the model for stochastic simulations. The parameter estimates and standard errors from the VAR and AR estimates provide a converging model that satisfies steady state and equilibrium conditions. Impulse responses from various economic shocks show a speedy adjustment process from real GDP shock and a lengthy economy-wide adjustment from real interest rate shocks. The money-in-the-utility function specification allows the model to be appropriately used for monetary policy analysis. Alongside the results, simulation codes and further results are given.

The Stata .Do file estimates the parameters for the DSGE Model.

The .mod file simulates the stochastic model based on parameter estimates.