Grant detail

GA UK (principal investigator) - Current policy issues through the lens of DSGE models (submitted in November 2015)

Principal investigator: Mgr. David Svačina
Collaborators: Ing. Aleš Maršál M.A.
Description: DSGE models are as structural models capable of performing counterfactual analyses. In the first year, we will use this property to estimate impact of Czech National Bank's exchange rate management in November 2013: setting of a minimum exchange rate target along with the commitment to unlimited FX interventions to uphold it. Czech experience is unique as it is the only country that devalued currency through such minimum target to increase inflation and GDP growth with interest rate at the zero lower bound. Evaluation of how successfully were these goals achieved will help the Czech Republic and many other similar small open economies determine whether to use this instrument in future. In the second year, we will estimate impact of eurozone membership during the recent crisis for the Czech Republic, Hungary, and Poland as well as impact of being outside eurozone for Slovakia. Lessons from this historical experience will help countries decide whether or when to adopt the common currency. DSGE models are also a common tool for forecasting. In the third year, we will in particular evaluate forecasting performance of models that incorporate non-fundamental shocks such as consumer confidence and that use surveys as proxies for them in estimations.
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End date: 2018
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Partners

Deloitte

Sponsors

CRIF
McKinsey
Patria Finance