A small continuous time macro-econometric model of the Czech Republic |
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Authors: | Emil Stavrev |
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Institution: | International Monetary Fund, 700 19th Street, N.W., EU2 Department, Washington D.C. 20431, USA (email: Estavrev@imf.org)., US
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Abstract: | In this paper we estimate a continuous time macro-econometric model of the Czech economy. The model is built as a system of twelve non-linear differential equations. We illustrate how the model can be used to determine the nominal equilibrium exchange rate of the Czech koruna in a macro-economic framework. The paper also investigates the effectiveness of monetary and fiscal policies in the presence of a fixed exchange rate regime and massive capital inflows. The search for an equilibrium path is outlined and stability and sensitivity analyses are provided, along with in-sample static and dynamic predictions with the approximate discrete analogue. |
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