2009
14/2009
Stock market wealth effects in an estimated DSGE model for Hong Kong
Author(s): Michael Funke, Michael Paetz and Ernest Pytlarczyk
2009. 43 pages / sivua.
Publisher: Suomen Pankki
ISBN 978-952-462-983-6 (Web publication)
Search words: DSGE models, wealth effects, open economy, Hong Kong, D91, E21, E44, F41, Michael Funke, Michael Paetz, Ernest Pytlarczyk
This paper develops and estimates an open economy dynamic stochastic general equilibrium (DSGE) model of the Hong Kong economy. The model features short-run price rigidities generated by monopolistic competition and staggered reoptimisation. The model is enhanced with wealth effects due to stock price dynamics, which we believe to be important. For this reason we adopt a perpetual youth approach. Model parameters and unobserved components are estimated with a Bayesian maximum likelihood procedure, conditional on prior information concerning the values of parameters.