Non–linear restrictions in DSGE models: The effect of foreign exchange interventions in Czech economy
| Authors | |
|---|---|
| Year of publication | 2015 |
| Type | Article in Proceedings |
| Conference | Proceedings of the 33rd International Conference Mathematical Methods in Economics |
| MU Faculty or unit | |
| Citation | |
| Web | http://mme2015.zcu.cz/downloads/MME_2015_proceedings.pdf |
| Field | Economy |
| Keywords | unconventional monetary policy; exchange rate intervention; DSGE models; Zero Lower Bound |
| Description | In this paper we deal with zero lower bound on interest rates and implementing this restriction into the DSGE models. As an example, we apply the zero lower bound into the relation for interest rates in the estimated DSGE model based on Czech data. Besides that, we study the foreign exchange interventions used by Czech National Bank as an unconventional monetary policy tool, when interest rates cannot be used. We implement the foreign exchange intervention function into the model and study impact of intervention on the behaviour of economy represented by model. In the first section, we describe the method and its application into the model. In the second section, we verify its robustness and consistence simulating the impulse responses to model innovations and paths of model variables for stochastically generated sets of model parameters. In the third section, we discuss results of these simulations and compare behaviour of economy represented by model with economic reality. |
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