<abstract xmlns="http://www.w3.org/1999/xhtml"><p> The goal of this paper is to identify and compare the most important changes in the structure of the Czech economy, as a small open economy with independent monetary policy, the Slovak economy, as a small open economy that entered monetary union, and the economy of the euro area, which has a common monetary policy, during the turbulent period of the Great Recession, the subsequent anaemic recovery and recent disinflationary period. Structural changes are identified with the help of nonlinear dynamic stochastic models of general equilibrium with time-varying parameters. The model parameters are estimated using Bayesian methods and a nonlinear particle filter. The results confirm the similarity of the Czech and Slovak economies and show that in certain respects the structure of the Czech economy might be closer to that of the euro area than that of Slovakia. The time-varying estimates reveal many similarities between the parameter changes in the Czech economy and those in the euro area. In Slovakia, the situation during the Great Recession was dominated by the country’s adoption of the euro, which caused large deviations in its Calvo parameters.</p></abstract>

The goal of this paper is to identify and compare the most important changes in the structure of the Czech economy, as a small open economy with independent monetary policy, the Slovak economy, as a small open economy that entered monetary union, and the economy of the euro area, which has a common monetary policy, during the turbulent period of the Great Recession, the subsequent anaemic recovery and recent disinflationary period. Structural changes are identified with the help of nonlinear dynamic stochastic models of general equilibrium with time-varying parameters. The model parameters are estimated using Bayesian methods and a nonlinear particle filter. The results confirm the similarity of the Czech and Slovak economies and show that in certain respects the structure of the Czech economy might be closer to that of the euro area than that of Slovakia. The time-varying estimates reveal many similarities between the parameter changes in the Czech economy and those in the euro area. In Slovakia, the situation during the Great Recession was dominated by the country’s adoption of the euro, which caused large deviations in its Calvo parameters.

Structural changes in the Czech, Slovak and euro area economies during the Great Recession

National Bank of Slovakia, Economic and Monetary Analyses Department, Imricha Karvaša 1, 813 25 Bratislava,

Masaryk University, Faculty of Economics and Administration, Lipová 41a, 602 00 Brno,

Review of Economic Perspectives

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

The goal of this paper is to identify and compare the most important changes in the structure of the Czech economy, as a small open economy with independent...

Structural changes in the Czech, Slovak and euro area economies during the Great Recession

Published Online: Dec 17, 2016

Page range: 297 - 336

Received: Jun 06, 2016

Accepted: Sep 26, 2016

DOI: https://doi.org/10.1515/revecp-2016-0018

Keywords
DSGE model, Great Recession, monetary union, time-varying parameters, particle filter

© by Stanislav Tvrz

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Structural changes in the Czech, Slovak and euro area economies during the Great Recession

Published Online: Dec 17, 2016

Page range: 297 - 336

Received: Jun 06, 2016

Accepted: Sep 26, 2016

DOI: https://doi.org/10.1515/revecp-2016-0018

KeywordsDSGE model, Great Recession, monetary union, time-varying parameters, particle filter

© by Stanislav Tvrz

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Keywords
DSGE model, Great Recession, monetary union, time-varying parameters, particle filter