Bayesian Estimation of the Parameters
The Bayesian analysis of the derived model is mainly based on Schorfheide (2000) such as An and Schorfheide (2007). The parameters of the DSGE model are estimated with a mixture of information contained in the data and prior beliefs about the distribution
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Springer awards “BestMasters” to the best application-oriented master’s theses, which were completed at renowned chairs of economic sciences in Germany, Austria, and Switzerland in 2014. The works received highest marks and were recommended for publication by supervisors. As a rule, they show a high degree of application orientation and deal with current issues from different fields of natural sciences, psychology, engineering, and economics. The series addresses practitioners as well as scientists and offers guidance for early stage researchers.
Lukas Heim
Inflation versus Price-Level Targeting Bayesian Estimation of a Small Open DSGE Model for Switzerland With a foreword by Prof. Dr. Luca Benati
Lukas Heim Luzern, Switzerland
BestMasters ISBN 978-3-658-08227-7 ISBN 978-3-658-08228-4 (eBook) DOI 10.1007/978-3-658-08228-4 Library of Congress Control Number: 2014956973 Springer Gabler © Springer Fachmedien Wiesbaden 2015 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. Printed on acid-free paper Springer Gabler is a brand of Springer Fachmedien Wiesbaden Springer Fachmedien Wiesbaden is part of Springer Science+Business Media (www.springer.com)
For Mami and Paps.
Foreword Following the recent financial crisis, academics and policymakers have been engaged in a wide-ranging reappraisal of the pros and cons of alternative monetary regimes and monetary policy instruments. The crisis highlighted two key issues which, before 2007-2008, had received scant attention: first, the role played by asset price bubbles in macroeconomic fluctuations; second, the fact that the probability of hitting the zero lower bound (ZLB) is significantly greater than previously thought. As for the former issue, the professionals’ response has been to augment the toolkit of monetary policy instruments with so-called ’macroprudential policies’ (e.g., limits to the size of a real estate loan compared to the price of the house which is being bought, or the income of the borrower). By surgically targeti
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