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DSGE models

The Economic Policy and Research division uses various DSGE models for scenario and counterfactual analyses. The list of models consists of both closed and open economy structures. As regards open economy models, the division uses either a multiregional model or two country models, depending on the scenario to be analyzed.

The EAGLE model

Division staff use the EAGLE model (Gomes et al., 2012) for the analysis of international spillovers of various structural shocks. The model consists of four regions, namely the home country, the Rest of the Euro Area, the US and the Rest of the World, and it has been re-calibrated in order to account for some key features of the Dutch economy. In the modified calibration, the Euro Area consists of the Netherlands and the Rest of the Euro Area. Furthermore, the staff has extended the model in the following dimensions:

  • EAGLE model with tariffs. In the face of the recent trade war between the US and China, the model has been extended with tariffs on imported goods in the US and China, respectively. The reference paper can be downloaded here.  
  • EAGLE model with finite lifetimes. The model has been extended to account for finite lifetime of households in the four regions. A Blanchard-Yaari structure is introduced which allows for a breakdown of Ricardian equivalence. A brief description of the model can be found here.  

Other DSGE models used for scenario analyses

The division staff with expertise on DSGE modeling has developed and published closed and open economy models which have been used selectively for analyses conditional of specific scenarios.  Below we list those in various categories. 

  • DSGE models for the monetary/fiscal policy mix
    1. Fiscal and monetary policy coordination, macroeconomic stability, and sovereign risk premia. Link  
    2. Finite horizons and the monetary/fiscal policy mix. Link
  • Open economy DSGE models and DSGE models for a monetary union 
    1. Generalized stability of monetary unions under regime switching in monetary and fiscal policies. Link 
    2. US monetary regimes and optimal monetary policy in the Euro Area. Link  
    3. Home biased expectations and macroeconomic imbalances in a monetary union. Link 

  •  DSGE models with bounded rationality 
    1. Forward guidance and the role of central bank credibility under heterogeneous beliefs. Link 
    2. Fiscal consolidations and heterogeneous expectations. Link 
    3. Behavioral learning equilibria in the New Keynesian model. Link