City Research Online

Abstract

We build four different dynamic stochastic general equilibrium (DSGE) models for a small open economy reflecting both neoclassical and Keynesian specifications. A DSGE model with full price and wage flexibility is initially constructed and then modified through nominal wage and price rigidities. The ability of the models to replicate important features of the business cycle activity in the UK is explored through statistical and econometric analysis. Evidence suggests that a monetary shock under the Taylor model with price stickiness can replicate a significant portion of the business cycle activity in the UK economy.

Publication Type:	Article
Additional Information:	© 2020 The Authors. Bulletin of Economic Research published by Trustees of the Bulletin of Economic Research and John Wiley & Sons Ltd This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
Publisher Keywords:	Small open economy, DSGE, wage rigidities, price rigidities, monetary-fiscal-technology shocks, simulated business cycles, long run dynamics, short run dynamics
Subjects:	D History General and Old World > DA Great Britain H Social Sciences > HB Economic Theory H Social Sciences > HC Economic History and Conditions J Political Science > JN Political institutions (Europe) > JN101 Great Britain
Departments:	School of Policy & Global Affairs > Economics
SWORD Depositor:	Symplectic Administrator

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