Open Economy DSGE Modelling with Applications to Emerging Economies 2023

The three-day course will serve as an introduction to Dynamic Stochastic General Equilibrium (DSGE) macroeconomic modelling for MSc, MRES, PhD students and for researchers in Universities, Central Banks, Finance Ministries and the private sector. For those with some DSGE modelling experience it provides a specialized treatment of open and emerging economies.

The course covers the construction, calibration and estimation of Dynamic Stochastic General Equilibrium (DSGE) models for open emerging economies and their use for policy analysis. It is an introductory course based on the Dynare software package, assumes a basic knowledge of Matlab as well as knowledge of dynamic optimization in macroeconomics.

The course begins with the basics of Dynare programming and will then build up, in stages, from closed economy Real Business Cycle and New Keynesian models to the open economy with emerging economy features. A behavioural small open economy will be compared with its rational expectations counterpart. The course will show how to use these models to analyse monetary and foreign exchange rate policy through the use of simple Taylor-type rules. The final day of the course will be devoted to the estimation of a small open emerging economy interacting with the rest of the world.

Course Programme

The instructors for the course will be Michael Ben-Gad, Leilane De Freitas Rocha Cambara, Vasco Gabriel, Paul Levine, Maryam Mirfatah, Joseph Pearlman and Sahil Ravgotra.

Course Contents

Taken over the three days the participants will be guided through a coherent methodology summarized by the following steps:

1. The construction of a small open economy (SOE) NK DSGE model with emerging economy features building in stages from closed economy RBC to New Keynesian (NK) models, to the SOE NK model

2. The dynare model set-ups consisting of first-order conditions for economic agents and equilibrium conditions in the form of non-linear static or difference equations

3. The solution of the steady state to be used for both solution and calibration

4. Monetary and foreign exchange intervention policy using simple Taylor-type rules

5. Comparison of a linearized rational expectations SOE NK model with a behavioural counterpart

6. Bayesian estimation methodology

7. The Bayesian estimation of the small open economy model interacting with the rest of the world using data from an emerging economy.

8. Model comparison and validation by comparison with the second moments of data

Day One

• Introduction to the Course
• Dynare Basics
• Construction of a basic SOE NK model proceeding in stages from the RBC Model, the NK Closed Economy to the NK Small Open Economy
• Incorporation of Emerging Economies Features: Credit Constrained Consumers and a Commodity Exporting Sector
• A Small Open Emerging Economy interacting with the Rest of the World (SOEROW Model)
• Exercises

Day Two

• Non-Linear and Linearized Workhorse NK SOE Model
• Policy using Monetary and Foreign Exchange Intervention Taylor-Type Rules
• Linearized NK SOE Behavioural Model
• • Model Construction
  • Resolution of Empirical Puzzle 
• Exercises

Day Three

• Bayesian Estimation of SOE-ROW model from Day 1 using data from an Emerging Economy
  • Bayesian Methodology
  • Estimation
  • Identification
  • Variance and Historical Decomposition
  • Model Comparison and Validation
• Exercises

Conference

The course will be followed by a one-day conference  where Professor Michael Ben-Gad, City University, will give a keynote lecture "War, Democracy and Economics".  

The programme will include the following papers that develop the Course material of Day 2:

Optimal Foreign Exchange Intervention Rules in a Small Open Emerging Economy by Leilane Cambara, University of Surrey.

Monetary Policy and Exchange Rate Dynamics in a Behavioural Open Economy Model by Sahil Ravgotra, University of Surrey.

Course participants are invited to submit papers. Papers on DSGE modelling are particularly invited, but other areas of macroeconomics, such as SVAR models, will also be considered.  Each accepted paper will have a discussant, giving you the opportunity to present your work and receive feedback. Full details of the conference programme will be provided nearer to the event.

How to apply

Applicants are advised to book earlier as there will be a limit on the number enrolled. To apply, please complete the registration form.

Once your application has been submitted it will be reviewed by the course tutors. Please ensure that you provide all the necessary information to help us process your application as quickly as possible.

You will then receive an email notification to confirm whether or not you have been accepted onto the course.

For those that have been offered a place, you will receive the link to pay the tuition fee via a secure portal. Please note we require payment to secure your place, and you will have two weeks to pay the full balance to secure this.

Once payment has been received you will receive confirmation of your place on the course, and further information so you have everything you need.

Fees

On-site fees include breaks with coffee/tea/biscuits/fruit; lunch and a course dinner at the end of Day Three. Participants must meet their own travel and hotel costs.

• Non-academic participants: online, £1000; residential, £1400
• Academics: online, £600; residential, £800
• Students: online, £300; residential, £400

Residential fees include breaks with coffee/tea/biscuits/fruit; lunch and a Course dinner at the end of Day 3

Funding opportunities: The following concessions is available: 20% discount for participants working or studying in institutions in developing countries.

Software

The online lectures will take place via Zoom and residential lectures in a lecture theatre at City. All participants will need Matlab downloaded on their computer (you can get a 30-day free trial from the Matlab site).

You also need to have the latest version 5.3 Dynare installed, but this is free. Dynare model files will be provided for participants.

Local hotels

Premier Inn London Farringdon

DoubleTree by Hilton London Angel Kings Cross

For more information please email Nayab Kanwal.