Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82072
Authors: 
Dam, Niels Arne
Gregers Linaa, Jesper
Year of Publication: 
2005
Series/Report no.: 
EPRU Working Paper Series 2005-02
Abstract: 
We decompose the Danish business cycle into ten structural shocks using an open-economy DSGE model with infrequent determination of prices and wages which we estimate with Bayesian techniques. Consistent with the Danish monetary policy regime, we formulate an imperfect peg on the foreign exchange rate and analyse the resulting monetary transmission mechanism. We find that the Danish business cycle is dominated by stochastic movements in the labour supply in the long term, while demand shocks play a major role in the short term. Remarkably, the role of technology is negligible, and foreign factors only contribute little to the Danish business cycle, especially in the long term. With respect to the estimation, we generally find believable estimates although the degree of price stickiness is remarkably high.
Subjects: 
open economy
peg
business cycles
Bayesian estimation
JEL: 
E3
E4
F4
Document Type: 
Working Paper

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