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

Le, Vo Phuong Mai, Meenagh, David ORCID: https://orcid.org/0000-0002-9930-7947, Minford, Patrick 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 EU using indirect inference. [Working Paper]. Cardiff Economics Working Papers, Cardiff: Cardiff University.

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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:	Monograph (Working Paper)
Date Type:	Publication
Status:	Published
Schools:	Schools > Business (Including Economics)
Subjects:	H Social Sciences > HB Economic Theory
Publisher:	Cardiff University
Date of First Compliant Deposit:	30 March 2016
Last Modified:	28 Oct 2022 10:18
URI:	https://orca.cardiff.ac.uk/id/eprint/77816

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