Working Paper presents research work by both Danmarks Nationalbank’s employees and our partners. The series is primarily targeted at professionals and people with an interest in central banking research as well as economics and finance in a broader sense.

Economic activity

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

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. ...