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ABSTRACT
In this paper we asses the effects and the transmission mechanisms of domestic and external shocks (we take a productivity shock associated to an imported energy shock) on the macroeconomic variables of a small open economy, using a dynamic stochastic general equilibrium model. We estimate a DSGE model in an open economy: France. In a first step, we begin by studying the cyclical features of the French economy, those of its main trading partners and the USA; this exercise enables us to make comparisons between France and its European neighbours. Once the facts are established, we will describe our model, its main features, then we solve it, make calibration and check the effects of exogenous shocks on the economic variables through the response impulse functions and the variance decomposition. Finally, we make comparison between the model's statistical moments of order two and those related to real facts in order to assess the validity of the model. It appears from our investigation, a significant correlation of the French cyclical characteristics with those of its neighbours. The France economy is also more vulnerable to technology shocks than to price of imported energy shocks.
Keyword: Productivity shocks, imported energy shocks, DSGE model, Small open economy, France
INTRODUCTION
A small open economy like France is vulnerable to various kinds of shocks from domestic as well as external origin; we quote: shocks on the prices of the imported energy, shocks on foreign exchange rates (or shocks on the terms of trade), shocks of productivity...
Empirical analyses on the effects of economic shocks on macroeconomic variables were often carried out using econometric methods especially structural VAR models. However, during the last years, there was an increasing grow of analysis based on simulation methods using dynamic stochastic general equilibrium models.
Indeed, parallel to the methodological renewal initiated by Sims (1980), VAR modelling, the Eighties were also marked by another theoretical and methodological revival. The first models emerging from this revival, real business cycles models caused a wide controversy.
Our days this controversy seems to be dissipated due to a principal reason, the methodological innovation to which this current of research gave birth: the principle according to which a macroeconomic model must be established by the aggregation of a series of...