Work detail

Analysis of a Behavioral New Keynesian Model

Author: Mgr. Šárka Křížková
Year: 2018 - summer
Leaders: PhDr. Jiří Kukačka Ph.D.
Consultants:
Work type: Finance, Financial Markets and Banking
Masters
Language: English
Pages: 108
Awards and prizes:
Link: https://is.cuni.cz/webapps/zzp/detail/191788/
Abstract: The thesis focuses on the analysis of a Behavioral New Keynesian DSGE model.
In particular, various specifications of the model are collected from the existing
literature and their combinations are simulated. The specifications include heuristics
for forecasting output gap, sets of estimated or calibrated parameters and model
structures. The resulting simulated output and inflation gap series are compared
with the macroeconomic stylized facts and real world data from the US and Euro
area based on their distributional characteristics and autocorrelation structures. In
addition, a comparison of various simulated model specifications is performed based
on the level of correlation between fractions of agents following a specific heuristic
and the resulting output and inflation gap values.
The distributional characteristics of the US output gap seem to be matched the
best by the specifications with unbiased and extrapolative output gap heuristics
generating series with higher levels of variance and kurtosis. Contrarily, the Euro
output gap is best matched by specifications with optimistic, pessimistic and unbiased
heuristics producing series with lower levels of variance and kurtosis. Second,
the autocorrelation structure of the simulated series tends to mirror the stylized
facts as opposed to the real world data for both the US and Euro area. Next, significant
positive autocorrelation is detected even in forward-looking model structures
indicating the presence of the endogenous transmission process of shocks. Finally,
the level of correlation between the fractions of agents using a given heuristic with
the simulated series is mainly dependent on the definition of heuristics. Particularly,
only models including optimistic and pessimistic heuristics exhibit high levels
of such correlation and thus generate endogenous sources of business cycles
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