An Estimated Dynamic Stochastic General Equilibrium Model of the Jordanian Economy
IMF Working Papers, February 1, 2011
Source details
- Canonical URL
- An Estimated Dynamic Stochastic General Equilibrium Model of the Jordanian Economy
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Bibliographic details
- Authors: Tigran Poghosyan, Samya Beidas-Strom
- Published: February 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455216758.001
Model description
- Presents a small open economy dynamic stochastic general-equilibrium model (DSGE) for the Jordanian economy.
- Model features:
- Nominal and real rigidities.
- Imperfect competition.
- Habit formation in the consumer’s utility function.
- Oil imports explicitly modeled in the consumption basket and domestic production.
Estimation and data
- Bayesian estimation methods are employed.
- Frequency of data: quarterly Jordanian data.
- Model properties are analyzed using impulse response analysis of identified structural shocks pertinent to the economy.
Key findings and simulation results
- Estimates of the structural parameters fall within plausible ranges.
- Simulation results indicate:
- The pegged exchange rate regime amplifies output volatility.
- The pegged exchange rate regime amplifies consumption volatility.
- The pegged exchange rate regime amplifies (price and wage) inflation volatility.
- The pegged exchange rate regime offers a relatively low risk premium.
- The model’s properties are used to assess the effectiveness of the pegged exchange rate regime in minimizing inflation and output trade-offs.
Subject areas and keywords
- Subject: Consumption, Inflation, Labor, Oil consumption, Oil prices
- Keywords: exchange rate, interest rate, WP