Simulations under Uncertainty
Stéphane Adjemian, Christophe Cahn, Antoine Devulder and Nicolas Maggiar (en français)
June 2009
Abstract
In this paper, we try to illustrate the interest of the Bayesian approach for the evaluation of economic policies, often realised by analysing the response of the economy to a standard shock. We present a Stochastic Dynamic General Equilibrium model for the euro area. The Bayesian estimation gives a measure of the uncertainty on the parameters, from which we can derive the uncertainty of the responses to standard shocks. As an illustration, we simulate the effects of a fiscal shock (announced VAT increase).
Keywords: DSGE, euro zone, nominal rigidities, bayesian estimation.
JEL Codes: E4, E5.
