A compact open economy DSGE model for Switzerland

This study describes a compact dynamic stochastic general equilibrium (DSGE) model fitted for the Swiss economy with Bayesian techniques. The model features two economies (small home economy, large foreign economy), five types of agents (households, producers of tradables, producers of non-tradables, retailers, monetary authority), nominal and real frictions, and a number of shocks. The study gives details on the specification and the estimation of the model. The evaluation is based on impulse responses and variance decompositions, a DSGE-VAR to assess misspecifications, and results of forecasting experiments. The model is one of the tools used for policy analysis and forecasting at the Swiss National Bank.