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Monetary policy of oil-exporting countries with informality: a DSGE analysis of Iraq
Safar, Nour ; Holub, Tomáš (advisor) ; Dědek, Oldřich (referee)
The thesis investigates the efficiency of monetary policy using the New Keynesian Dynamic Stochastic General Equilibrium (NKDSGE) model in an economy reliant on oil exports and a large informal sector. The model is calibrated for the Iraq case to capture macroeconomic variables' responses to oil price shocks. The study aims to explore the impact of the shock on macroeconomic variables in the presence of the informal sector and how responses might change assuming a small informal sector. The model shows that the informal economy increases home prices and inflation, but the model does not reveal a Dutch disease. The study concludes that monetary policy, represented by the Taylor rule, is an inefficient tool for affecting macroeconomic variables.
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Reinforcement learning in Agent-based macroeconomic model
Vlk, Bořivoj ; Skuhrovec, Jiří (advisor) ; Holub, Tomáš (referee)
Utilizing game theory, learning automata and reinforcement learning concepts, thesis presents a computational model (simulation) based on general equilibrium theory and classical monetary model. Model is based on interacting Constructively Rational agents. Constructive Ratio- nality has been introduced in current literature as machine learning based concept that allows relaxing assumptions on modeled economic agents information and ex- pectations. Model experiences periodical endogenous crises (Fall in both production and con- sumption accompanied with rise in unemployment rate). Crises are caused by firms and households adopting to a change in price and wage levels. Price and wage level adjustments are necessary for the goods and labor market to clear in the presence of technological growth. Finally, model has good theoretical background and large potential for further de- velopment. Also, general properties of games of learning entities are examined, with special focus on sudden changes (shocks) in the game and behavior of game's play- ers, during recovery from which rigidities can emerge. JEL Classification D80, D83, C63, E32, C73, Keywords Learning, Information and Knowledge, Agent-based, Reinforcement learning, Business cycle, Stochastic and Dynamic Games, Simulation, Modeling Author's e-mail...
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Reinforcement learning in Agent-based macroeconomic model
Vlk, Bořivoj ; Skuhrovec, Jiří (advisor) ; Holub, Tomáš (referee)
Utilizing game theory, learning automata and reinforcement learning concepts, thesis presents a computational model (simulation) based on general equilibrium theory and classical monetary model. Model is based on interacting Constructively Rational agents. Constructive Ratio- nality has been introduced in current literature as machine learning based concept that allows relaxing assumptions on modeled economic agents information and ex- pectations. Model experiences periodical endogenous crises (Fall in both production and con- sumption accompanied with rise in unemployment rate). Crises are caused by firms and households adopting to a change in price and wage levels. Price and wage level adjustments are necessary for the goods and labor market to clear in the presence of technological growth. Finally, model has good theoretical background and large potential for further de- velopment. Also, general properties of games of learning entities are examined, with special focus on sudden changes (shocks) in the game and behavior of game's play- ers, during recovery from which rigidities can emerge. JEL Classification D80, D83, C63, E32, C73, Keywords Learning, Information and Knowledge, Agent-based, Reinforcement learning, Business cycle, Stochastic and Dynamic Games, Simulation, Modeling Author's e-mail...
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Rational Inattention in DSGE Model
Vostřák, David ; Malovaná, Simona (advisor) ; Kopečná, Vědunka (referee)
A great amount of available information over the internet makes it impossible for anyone to process it all. In this thesis, we use the rational inattention theory to see how the perceived signals about the exogenous variables would change under different levels of information capacity. Those signals are then applied in the New Keynesian model and corresponding impulse responses are compared with the case of unlimited attention. We found that for some autoregressive processes the differences from the perfect attention case are not very profound while for others the results vary considerably.
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The Relationship between Unemployment Components and Economic Growth: the Czech Republic Case
Kopečná, Vědunka ; Baxa, Jaromír (advisor) ; Chytilová, Julie (referee)
The choice of an appropriate government policy tool to promote the employment should be done with regard to the source of unemployment. This diploma the- sis investigates structural and cyclical components of unemployment. The two components are induced by different causes. Search and matching frictions in the labor market are the source of the structural component. The cyclical component is induced by a low labor productivity which induces a negative gross marginal profit of firms. Consequently, they are obliged to cancel a portion of existing job- worker matches. The main finding is that during a period of economic slowdown the overall unemployment and its cyclical component rise while the structural component declines. The dynamics of the two components is reversed during a robust economic growth. The diploma thesis proceeds with investigating the pub- lic hiring, a policy potentially suitable to diminish the unemployment during an economic slowdown. The results show that the public hiring can be successfully applied despite the private employment crowding out. A New Keynesian DSGE model calibrated for the Czech Republic is used to model the labor market dy- namics. The results are interpreted with regard to the historic development of the unemployment and the economic growth from 2000 to 2014. JEL...
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Confidence Cycles and Liquidity Hoarding
Audzei, Volha
Market confidence has proved to be an important factor during past crises. However, many existing general equilibrium models do not account for agents’ expectations, market volatility, or overly pessimistic investor forecasts. In this paper, we incorporate a model of the interbank market into a DSGE model, with the interbank market rate and the volume of lending depending on market confidence and the perception of counterparty risk. In our model, a credit crunch occurs if the perception of counterparty risk increases. Our results suggest that changes in market confidence can generate credit crunches and contribute to the depth of recessions. We then conduct an exercise to mimic some central bank policies: targeted and untargeted liquidity provision, and reduction of the policy rate. Our results indicate that policy actions have a limited effect on the supply of credit if they fail to influence agents’ expectations. Interestingly, a policy of a low policy rate worsens recessions due to its negative impact on banks’ revenues. Liquidity provision stimulates credit slightly, but its efficiency is undermined by liquidity hoarding.
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Labour Market Modelling within a DSGE Approach
Tonner, Jaromír ; Tvrz, Stanislav ; Vašíček, Osvald
The goal of this paper is to find a suitable way of modelling the main labour market variables in the framework of the CNB’s core DSGE model. The model selection criteria are: the predictive ability for unemployment, the change in the overall predictive ability in comparison to the baseline model and the extent of the required model change. We find that the incorporation of a modified Galí, Smets and Wouters (2011) labour market specification allows us to predict unemployment with an acceptable forecast error. At the same time it leads to a moderate improvement in the overall predictive ability of the model and requires only minor adjustments to the model structure. Thus, it should be preferred to more complicated concepts that yield a similar improvement in predictive ability. We also came to the conclusion that the concept linking unemployment and the GDP gap is promising. However, its practical application would require (additional) improvement in the accuracy of the consumption prediction. As a practical experiment, we compare the inflation pressures arising from nominal wages and the exchange rate in the baseline model and in alternative specifications. The experiment is motivated by the use of the exchange rate as an additional monetary policy instrument by the CNB since November 2013 in an environment of near-zero interest rates and growing disinflationary pressures. We find that the baseline model tends to forecast higher nominal wage growth and lower exchange rate depreciation than the models with more elaborate labour markets. Therefore, the alternative models would probably have identified an even higher need for exchange rate depreciation than the baseline model did.
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Bayesovský odhad DSGE modelů
Bouda, Milan ; Pánková, Václava (advisor) ; Kodera, Jan (referee) ; Lukáš, Ladislav (referee)
Thesis is dedicated to Bayesian Estimation of DSGE Models. Firstly, the history of DSGE modeling is outlined as well as development of this macroeconometric field in the Czech Republic and in the rest of the world. Secondly, the comprehensive DSGE framework is described in detail. It means that everyone is able to specify or estimate arbitrary DSGE model according to this framework. Thesis contains two empirical studies. The first study describes derivation of the New Keynesian DSGE Model and its estimation using Bayesian techniques. This model is estimated with three different Taylor rules and the best performing Taylor rule is identified using the technique called Bayesian comparison. The second study deals with development of the Small Open Economy Model with housing sector. This model is based on previous study which specifies this model as a closed economy model. I extended this model by open economy features and government sector. Czech Republic is generally considered as a small open economy and these extensions make this model more applicable to this economy. Model contains two types of households. The first type of consumers is able to access the capital markets and they can smooth consumption across time by buying or selling financial assets. These households follow the permanent income hypothesis (PIH). The other type of household uses rule of thumb (ROT) consumption, spending all their income to consumption. Other agents in this economy are specified in standard way. Outcomes of this study are mainly focused on behavior of house prices. More precisely, it means that all main outputs as Bayesian impulse response functions, Bayesian prediction and shock decomposition are focused mainly on this variable. At the end of this study one macro-prudential experiment is performed. This experiment comes up with answer on the following question: is the higher/lower Loan to Value (LTV) ratio better for the Czech Republic? This experiment is very conclusive and shows that level of LTV does not affect GDP. On the other hand, house prices are very sensitive to this LTV ratio. The recommendation for the Czech National Bank could be summarized as follows. In order to keep house prices less volatile implement rather lower LTV ratio than higher.
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Competing currencies as an alternative scenario to legal tender clause: Mathematical proof
Gawthorpe, Kateřina ; Stroukal, Dominik (advisor) ; Nikolovová, Pavla (referee)
Previous literature examining the scenario without the constraint of legal tender law is a rather theoretical analysis of the subject matter. Aside from the theoretical examination of the competition of money this paper offers dynamic structural macroeconomic model based on the money in the utility function. This model compares the current monetary conditions with the potential situation permitting more currencies circulating alongside. The main assumption about individuals' preferences over stable currencies underlines the whole paper with emphasis on the mathematical model. The uniqueness of this model lies in the incorporation of variables affecting respective money demand functions into the utility function of the DSGE model and in the purpose of its use as well as its variables, where representative agent is a household owning a bank rather than a firm. Overall the results of this paper favor the idea of exclusion of the legal tender law in a developed country without severe turmoil. Particularly, the ascent of competition among currencies leads to lower inflation than present scenario. However, final simulations of the model in Matlab supplements such so far "unambiguous" view with skepticism due to possible difficulties during discovery process in such scenario.
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Testování kvality predikcí: vyhodnocení modelu g3
Tkáčik, Marcel ; Vozárová, Pavla (advisor) ; Janíčko, Martin (referee)
Recent developments of New Keynesian models attracted many central banks to develop their own DSGE models for policy analysis and forecasting. The aim of this study is to evaluate the quality of the predictions made by the Czech National Bank which developed its own DSGE model and use it as the core forecasting model from July 2008. The quality of the predictions has been evaluted by comparing it with the Ministry of Finance of the Czech Republic and two commercial banks (Česká spořitelna and Komerční banka). Using the econometrical tests for the structural break and time series analysis, it has been concluded that the Czech National Bank experienced significant improvement in its prediction quality when employing the DSGE model, and surpassed the other three institutions. This study suggests that a well-specified DSGE model may enhance the prediction quality of key macroeconomic indicators compared to non-structural models and expert judgment.
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