The non-linear nature of country risk and its implications for DSGE models
dc.contributor.author | Brzoza-Brzezina, Michał | |
dc.contributor.author | Kotłowski, Jacek | |
dc.date.accessioned | 2023-08-01T08:01:58Z | |
dc.date.available | 2023-08-01T08:01:58Z | |
dc.date.issued | 2018-05 | |
dc.identifier.citation | Brzoza-Brzezina M., Kotłowski J., The non-linear nature of country risk and its implications for DSGE models, SGH KAE Working Papers, 2018, nr 2018/035, s. 1-33 | en |
dc.identifier.uri | http://hdl.handle.net/20.500.12182/1163 | |
dc.description.abstract | Country risk premia can substantially affect macroeconomic dynamics. We concentrate on one of their most important determinants - a country’s net foreign asset position and - in contrast to the existing research - investigate its nonlinear link to risk premia. The importance of this particular non-linearity is twofold. First, it allows to identify the NFA level above which the elasticity becomes much (possibly dangerously) higher. Second, such a non-linear relationship is a standard ingredient of DSGE models, but its proper calibration/ estimation is missing. Our estimation shows that indeed the link is highly nonlinear and helps to identify the NFA position where the non-linearity kicks in at approximately -70% to -75% of GDP. We also provide a proper calibration of the risk premium - NFA relationship which can be used in DSGE models and demonstrate that its slope matters significantly for economic dynamics in such a model. | en |
dc.language.iso | en | |
dc.rights | Dozwolony użytek | * |
dc.subject | risk premium | en |
dc.subject | PSTR model | en |
dc.subject | open economy DSGE model | en |
dc.subject.classification | C23 | en |
dc.subject.classification | E43 | en |
dc.subject.classification | E44 | en |
dc.title | The non-linear nature of country risk and its implications for DSGE models | en |
dc.type | workingPaper | en |
dc.description.number | 2018/035 | en |
dc.description.physical | 1-33 | en |
dc.description.series | SGH KAE Working Papers Series | en |
dc.identifier.urlpublisher | http://wydawnictwo.sgh.waw.pl | en |
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