No. 12 Ramses II – Model Description

Ramses II – Model Description

By Malin Adolfson, Stefan Laséen, Lawrence Christiano, Mathias Trabandt and Karl Walentin

February 2013

Abstract

This paper describes Ramses II, the dynamic stochastic general equilibrium (DSGE) model currently in use at the Monetary Policy Department of Sveriges Riksbank. The model is used to produce macroeconomic forecasts, alternative scenarios, and for monetary policy analysis.

The model was initially developed by Christiano, Trabandt and Walentin (2011). This paper describes the version of the model used for policy and differs in some respects from Christiano, Trabandt and Walentin. Compared with the earlier DSGE model at Sveriges Riksbank, the Ramses model developed by Adolfson et. al. (2008), Ramses II differs in three important respects: i) fi…nancial frictions are introduced in the accumulation of capital following Bernanke, Gertler and Gilchrist (1999), ii) the labor market block includes search and matching following Mortensen and Pissarides (1994), and iii) imports are allowed to enter export production as well as in the aggregate consumption and investment baskets.

Keywords: DSGE, fi…nancial frictions, labor market frictions, unemployment, small open economy, Bayesian estimation.

JEL codes: E0, E3, F0, F4, G0, G1, J6.