Labor Market Rigidities and Monetary Switch in a DSGE Model: Application To The Slovak Economy

Authors

PÁPAI Adam

Year of publication 2016
Type Article in Proceedings
Conference Quantitative Methods in Economics; Multiple Criteria Decision Making XVIII
MU Faculty or unit

Faculty of Economics and Administration

Citation
Field Economy
Keywords DSGE model; labor market; frictions; Slovak economy; switch
Description This paper investigates the structural and dynamical characteristics of the Slovak economy during the last 13 years. The focus lies mainly in the examination of the Slovak labor market. To achieve our goal, we use a dynamic stochastic general equilibrium model for small open economies. The selected model contains several labor market rigidities, like search and matching processes, wage adjustment costs and hiring costs to improve our results of estimation. Furthermore, we augment the model with switching mechanism to capture the entry of Slovak Republic into the Eurozone, therefore abandoning its autonomous monetary policy. Our results suggest that there are significant rigidities in the Slovak labor market. Also, the Slovak Republic is greatly influenced by foreign economic forces.
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