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An Estimated DSGE Model for Sweden with a Monetary Regime Change
Princeton University.
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies.
2005 (English)Report (Other academic)
Abstract [en]

Using Bayesian methods, we estimate a small open economy model for Sweden. We explicitly account for a monetary regime change from an exchange rate target zone to flexible exchange rates with explicit targeting. In each of these regimes, we analyze the behavior of the monetary authority and the relative contribution to the business cycle of structural shocks in detail. Our results can be summarized as follows. Monetary policy is mainly concerned with stabilizing the exchange rate in the target zone and with price stability in the inflation targeting regime. Expectations of realignment and the risk premium are the main sources of volatility in the target zone period. In the inflation targeting period, monetary shocks are important sources of volatility in the short run, but in the long run, labor supply and preference shocks become relatively more important. Foreign shocks are much more destabilizing under the target zone than under inflation targeting.

Place, publisher, year, edition, pages
Stockholm: IIES , 2005. , 62 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University. (Online), ISSN 1653-610X ; 740
Keyword [en]
Bayesian estimation, DSGE models, target zone, inflation targeting, regime change
National Category
URN: urn:nbn:se:su:diva-42219OAI: diva2:344420
Available from: 2010-08-19 Created: 2010-08-19 Last updated: 2010-08-19Bibliographically approved

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