| Summary: | 碩士 === 國立中央大學 === 經濟學系 === 102 === We create a small open economy using dynamic stochastic general equilibrium(DSGE)model, which is built on Escudé(2012), and use this model to estimate some important parameters by Bayesian estimation. We also use this model to observe how exogenous shocks influence Taiwan's economy. Compared with the original model, we add wage rigidity which is a common design in a DSGE model and a new production function.
The result finds that the nominal price and wage rigidity in Taiwan are more flexible than Euro area. Taiwan's central bank prefers to use nominal interest rule to reduce the inflation gap, and adopts nominal exchange rate to decrease the output gap. In the end,by using impulse response function (IRF), we can know how the increase of some factors such as international risk-free rate and government expenditure influences Taiwan's economy.
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