Two orthogonal continents? Testing a two-country DSGE model of the US and the EU using indirect inference

Le, Vo Phuong Mai ORCID: https://orcid.org/0000-0003-3374-9694, Meenagh, David ORCID: https://orcid.org/0000-0002-9930-7947, Minford, Anthony Patrick Leslie ORCID: https://orcid.org/0000-0003-2499-935X and Wickens, Michael ORCID: https://orcid.org/0000-0002-6862-0674 2009. Two orthogonal continents? Testing a two-country DSGE model of the US and the EU using indirect inference. Open Economies Review 21 (1) , pp. 23-44. 10.1007/s11079-009-9141-9

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Abstract

We examine a two country model of the EU and the US. Each has a small sector of the labour and product markets in which there is wage/price rigidity, but otherwise enjoys flexible wages and prices with a one quarter information lag. Using a VAR to represent the data, we find the model as a whole is rejected. However it is accepted for real variables, output and the real exchange rate, suggesting mis-specification lies in monetary relationships. The model highlights a lack of spillovers between the US and the EU.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Advanced Research Computing @ Cardiff (ARCCA) Business (Including Economics)
Subjects:	H Social Sciences > H Social Sciences (General) H Social Sciences > HA Statistics H Social Sciences > HB Economic Theory H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management H Social Sciences > HG Finance J Political Science > JK Political institutions (United States) J Political Science > JN Political institutions (Europe)
Uncontrolled Keywords:	Bootstrap ; Open economy model ; DSGE ; VAR ; New Keynesian ; New Classical ; Indirect inference ; Wald statistic
Publisher:	Springer
ISSN:	0923-7992
Last Modified:	05 Nov 2022 15:01
URI:	https://orca.cardiff.ac.uk/id/eprint/22161

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