What Drives the Business Cycle in a Small Open Economy? Evidence from an estimated DSGE Model of the Danish Economy

Working paper no 88, 2013

Authors Pedersen, Jesper; Ravn, Søren Hove
Subject Danish Economy; Economic activity and employment; Other economic analyses
Type Working paper
Year 2013
Published 18 December 2013
Estimated DSGE models have become the standard workhorse model for empirically based macroeconomic analysis in recent years. In this paper, we present an estimated DSGE model for Denmark. The model has been estimated using Bayesian methods and a dataset consisting of 23 macroeconomic variables. We use the model to identify the most important determinants of business cycle fluctuations in Denmark. Our results indicate that foreign shocks explain more than 50 pct. of the variation in Danish real GDP. ...