Job Market Paper

"Evaluating the forecasting accuracy of closed- and open economy New Keynesian DSGE models"

(single-author)

The primary purpose of this paper is to compare the forecasting performance of a small open economy New Keynesian Dynamic Stochastic General Equilibrium (SOE-NK-DSGE) model with its closed-economy counterpart. Based on the quarterly Australian data, these two models are recursively estimated, and point forecasts for seven domestic variables are compared. Since Australia is a small open economy, global economic integration and financial linkage play an essential role in this country. However, the empirical findings indicate that the open economy model yields predictions that are less accurate than those from its closed economy counterpart. Two possible reasons could cause this failure of the SOE-NK-DSGE model: (1) misspecification of the foreign sector, and (2) a higher degree of estimation uncertainty. Thus, this research paper examines further how these two issues are associated with this practical problem. To this end, we perform two additional exercises in a new variant of the SOE-NK-DSGE and Bayesian VAR models. Consequently, the findings from these two exercises reveal that a combination of misspecification of the foreign sector and a higher degree of estimation uncertainty causes the failure of the open economy DSGE model in forecasting.

JEL Classification: B22, C11, E37, E47 .

Keywords: Small open economy New Keynesian DSGE model, Bayesian estimation, forecasting accuracy, RMSEs.

Working Papers

"The Vietnamese business cycle in an estimated small open economy New Keynesian DSGE model".

(single-author)

The primary purpose of this paper is to investigate the sources of the business cycle fluctuations in Vietnam. To this end, firstly, we develop a theoretical model of small open economy New Keynesian Dynamic Stochastic General Equilibrium (SOE-NK-DSGE). Accordingly, this underlying conceptual model includes various features, such as habit consumption, staggered price, price indexation, incomplete exchange-rate pass-through, the failures of the law of one price and the uncovered interest rate parity. This theoretical model is then estimated with the Bayesian technique and Vietnamese data from 1999Q1 to 2017Q1. Based on the estimated model, this paper provides several empirical pieces of evidence about the striking features of the business cycle fluctuations in this emerging economy. Indeed, this research paper is the first attempt to develop and estimate the SOE-NK-DSGE model with the Bayesian technique for Vietnam.

JEL classification: E12, E31, E32, E47, E52, F41, F43.

Keywords: The hybrid New Keynesian Phillip Curve (NKPC); business cycle fluctuations; open-economy macroeconomics; the short-run incomplete exchange-rate pass-through; the Bayesian estimation.

Publication

Phuong Van Nguyen. "Examining the Unemployment Invariance Hypothesis: The Case of Australia". The Australian Economic Review, Volume 49, Issue 1, March 2016.

https://onlinelibrary.wiley.com/doi/abs/10.1111/1467-8462.12139

Work-in-process papers

"The new variant of the hybrid New Keynesian Phillip Curve in an estimated two-country NK-DSGE model"

(single-author)

The main purpose of this research paper aims to build a two-country New Keynesian DSGE model. Indeed, we introduce a new variant of the hybrid New Keynesian Phillip Curve. Furthermore, we specify the correlated shocks across countries. Theoretically, these two specifications would enable an estimated two-country NK-DSGE model coinciding with the notable effects of the international spillover on a small open economy. To examine if this specification strategy is useful, the underlying theoretical model will be estimated with the Bayesian technique and data of three small open economies (Australia, Canada, and the United Kingdom).

JEL classification: E12, E31, E32, E47, E52, F41, F43.

Keywords: The new variant of hybrid New Keynesian Phillip Curve (NKPC); business cycle fluctuations; the international spillover; the short-run incomplete exchange-rate pass-through; the Bayesian estimation.

"A note on developing and estimating the family of the Bayesian time-series macroeconometrics"

(single-author)