OPTIMAL MONETARY POLICY WITH TWO COMPETING PRICING MODELING IN AN ESTIMATED DSGE MODEL FOR TUNISIA

In this paper we estimate two models competing of Tunisia economy. Each model incorporates various other features of the standard new-Keynesian model such as habit formation, costs of adjustment in capital accumulation and variable capacity utilization. The two versions of DSGE models are estimated on Tunisia data with Bayesian methods. Also, we compare the welfare properties of various monetary policies. In particular, the Ramsey allocation has been computed, giving a natural benchmark for welfare comparisons. Our results show that the DSGE model with nominal and real rigidities generate significant and persistent real effects in response to monetary policy shocks. In addition, the monetary authority absorbs shocks and protects the economy of technological shocks. Therefore, our estimates show that, despite the apparent similarities of the two versions of models (Calvo and the Sticky Information), their responses to shocks and fit to data are quite different. Consequently, monetary and economic authorities cannot afford to rely on a single reference model of the economy but need a large number of alternative modeling tools available when they take their decision of optimal monetary policy, since by definition each model is itself a simplification that does not take into account all relevant aspects of reality.