Comparing Shocks and Frictions in Us and Euro Area Business Cycles: A Bayesian DSGE Approach

36 Pages Posted: 10 Dec 2004

See all articles by Frank Smets

Frank Smets

European Central Bank (ECB); KU Leuven - Center for Economic Studies

Rafael Wouters

National Bank of Belgium

Multiple version iconThere are 3 versions of this paper

Date Written: September 2004

Abstract

This paper estimates a DSGE model with many types of shocks and frictions for both the US and the euro area economy over a common sample period (1974-2002). The structural estimation methodology allows us to investigate whether differences in business cycle behaviour are due to differences in the type of shocks that affect the two economies, differences in the propagation mechanism of those shocks or differences in the way the central bank responds to those economic developments. Our main conclusion is that each of those characteristics is remarkably similar across both currency areas.

Keywords: DSGE models, business cycle fluctuations

JEL Classification: E1, E3

Suggested Citation

Smets, Frank and Wouters, Rafael, Comparing Shocks and Frictions in Us and Euro Area Business Cycles: A Bayesian DSGE Approach (September 2004). Available at SSRN: https://ssrn.com/abstract=586762

Frank Smets (Contact Author)

European Central Bank (ECB) ( email )

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KU Leuven - Center for Economic Studies ( email )

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Belgium

Rafael Wouters

National Bank of Belgium ( email )

Brussels, B-1000
Belgium
+32 2 221 5441 (Phone)
+32 2 221 3162 (Fax)

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