Figure 1
Baseline parameter calibration
| Target | Symbol | Home country |
|---|---|---|
| Households | ||
| Share or Ricardian households | 1 – μ | 0.6 |
| Discount factor | β | 0.99 |
| Risk aversion | σc | 2 |
| Habits in consumption | h | 0.85 |
| Home bias | ψ; ψ* | 0.56; 0.03 |
| Production | ||
| Depreciation rate | δ | 0.025 |
| Private capital share | α | 0.4 |
| Public capital share | η | 0.015 |
| Adjustment cost parameter | κI | 2.48 |
| Labor market | ||
| Separation rate (private; public sector) | sp; sg | 0.06; 0.03 |
| Matching elasticity (private; public sector) | φp; φg | 0.5; 0.3 |
| Bargaining power | ζ | 0.5 |
| Price and wage stickiness | ||
| Calvo parameter (prices) | θp | 0.75 |
| Calvo parameter (existing wages) | θw | 0.8 |
| Calvo parameter (new wages) | 0.7 | |
| Market power (mark-up) | ɛ | 6 |
| Fiscal policy | ||
| Smoothing parameters | ρj | 0 – 0.1 |
| Persistence parameters | ρj | 0 – 0.85 |
| Stances | Φj | 0 – 0.1 |
| Monetary policy | ||
| Interest rate smoothing | ρR | 0.9 |
| Stance on inflation | Φπ | 1.5 |
| Stance on output gap | Φy | 0.5 |
| Trade in international bonds | ||
| Risk premium parameter | 0.01 | |
Eurozone members and their values of parameter ω_
| Country | 2018 | Country | 2018 |
|---|---|---|---|
| Germany | 0,2427 | Slovakia | 0,0160 |
| France | 0,1962 | Ireland | 0,0142 |
| Italy | 0,1773 | Lithuania | 0,0082 |
| Spain | 0,1368 | Slovenia | 0,0061 |
| Netherlands | 0,0504 | Latvia | 0,0057 |
| Belgium | 0,0334 | Estonia | 0,0039 |
| Greece | 0,0315 | Cyprus | 0,0025 |
| Portugal | 0,0302 | Luxembourg | 0,0018 |
| Austria | 0,0259 | Malta | 0,0014 |
| Finland | 0,0162 | ||