Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316537 
Authors: 
Year of Publication: 
2018
Citation: 
[Journal:] East Asian Economic Review (EAER) [ISSN:] 2508-1667 [Volume:] 22 [Issue:] 2 [Year:] 2018 [Pages:] 141-176
Publisher: 
Korea Institute for International Economic Policy (KIEP), Sejong-si
Abstract: 
The paper analyzes and compares the effects of domestic monetary policy using DSGE, DSGE-VAR, and VAR based on a two-country open economy model of Korea and the U.S. According to impulse response analysis, a domestic interest rate hike raises won value in the case of DSGE and DSGE-VAR models, while in the case of the unrestricted VAR model, it lowers won value. In the marginal data density standard, DSGE-VAR (μ=1) is superior to DSGE or Bayesian VAR over the sample period. Conversely, in the in-sample RMSE criterion, especially for the won/dollar exchange rate, VARs are superior to DSGE or DSGE-VAR. It is necessary to study further if these differences are caused by model misspecification or omitted variable bias.
Subjects: 
DSGE
DSGE-VAR
Bayesian VAR
Marginal Data Density
RMSE
JEL: 
E10
E50
F30
F40
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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