An Estimated Dynamic Stochastic General Equilibrium Model of the Jordanian Economy

Author/Editor:

Samya Beidas-Strom ; Tigran Poghosyan

Publication Date:

February 1, 2011

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper presents and estimates a small open economy dynamic stochastic general-equilibrium model (DSGE) for the Jordanian economy. The model features nominal and real rigidities, imperfect competition and habit formation in the consumer’s utility function. Oil imports are explicitly modeled in the consumption basket and domestic production. Bayesian estimation methods are employed on quarterly Jordanian data. The model’s properties are described by impulse response analysis of identified structural shocks pertinent to the economy. These properties assess the effectiveness of the pegged exchange rate regime in minimizing inflation and output trade-offs. The estimates of the structural parameters fall within plausible ranges, and simulation results suggest that while the peg amplifies output, consumption and (price and wage) inflation volatility, it offers a relatively low risk premium.

Series:

Working Paper No. 11/28

Subject:

English

Publication Date:

February 1, 2011

ISBN/ISSN:

9781455216758/1018-5941

Stock No:

WPIEA2011028

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

51

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