WSEAS Transactions on Mathematics
Print ISSN: 1109-2769, E-ISSN: 2224-2880
Volume 20, 2021
The Shock Reaction in a Simple Close Economy
Author:
Abstract: As the general objective of a representative government is to achieve in creating the economic
conditions that support the wellbeing of citizen, it, thus, needs to design and implement its policies in
an appropriated manner. Hence, to support the valuable information for designing and implementing
such policies, this work is designed to gain that information by trying to identify the reactions of various
variables to government policies. To meet this objective, this work proposed a simple close economy
Dynamic stochastic general equilibrium (DSGE) model with the public goods in the household
consumption bundle. Also, the usual shocks studied in the DSGE model were included in the reaction
investigation process. The Bayesian technique is then employed to estimate the model parameters by
using the quarterly detrended data of Thailand in the period of 2001 to 2019. The result showed the
crowding-out effect driven by government spending. Also, the reactions of the major macroeconomic
variables to each shock were consistent with some previous studies.
Search Articles
Pages: 264-275
DOI: 10.37394/23206.2021.20.27