XMas: An extended model for analysis and simulations - XMas: An extended model for analysis and simulations - Central Bank of Chile
The Working Paper Series of the Central Bank of Chile disseminates economic research conducted by Central Bank staff or third parties under the sponsorship of the Bank. The purpose of the series is to contribute to the discussion of relevant issues and develop new analytical or empirical approaches in their analysis. The only aim of the Working Papers is to disseminate preliminary research for its discussion and comments. Publication of Working Papers is not subject to previous approval by the members of the Board of the Central Bank. The views and conclusions presented in the papers are exclusively those of the author(s) and do not necessarily reflect the position of the Central Bank of Chile or of the Board members.
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The Extended Model for Analysis and Simulations (XMAS) is the Central Bank of Chile's newest dynamic stochastic general equilibrium (DSGE) model for macroeconomic projections and monetary policy analysis. Building on Medina and Soto (2007), the model includes several new features, in line with recent developments in the modeling of small open economies, particularly commodityexporting emerging economies such as Chile. The extensions over the base model include the modeling of non-core inflation dynamics, a commodity sector with endogenous production and investment, a labor market with search and matching frictions that allows for labor variation on both the intensive and extensive margins, an augmented fiscal block, as well as additional shocks and other real and nominal frictions. These features allow for a more granular analysis and more comprehensive forecasts of the Chilean economy, improving the fit of the model to macroeconomic data in several dimensions.