Empirical Evaluation of DSGE Models for Emerging Countries

Abstract

This dissertation is the collection of three essays aimed to evaluate the empirical performance of dynamic stochastic general equilibrium (DSGE) models in explaining the behavior of macroeconomic dynamics in emerging countries. Chapter 1, which is joint work with M. Uribe and R. Pancrazzi, investigates the hypothesis that a real business cycles model driven by permanent and transitory productivity shocks can explain well observed business-cycle fluctuations in emerging countries. The model is estimated using more than a century of Argentine data. In Chapter 2, a comprehensive real DSGE model of an emerging country is estimated using Bayesian techniques, expanding the data set used in Chapter 1. The goal is to characterize the relative relevance of ten different business cycles' drivers: three sectorial technology shocks, embodied and disembodied non-stationary technology, terms of trade, the world interest rate, trade policy, government expenditures and the country premium. Finally, Chapter 3 estimates (using Mexican data) a DSGE model of an emerging country containing many frictions, as has been recently argued, that impose non-trivial constraints for monetary-policy design. In particular, the framework features a sectorial decomposition of the productive sector, intermediate inputs, imperfect pass-through, endogenous premium to finance capital accumulation, a liability-dollarization problem, currency substitution, price and wage rigidities, and dynamics driven by eleven shocks.