Shocks and Frictions in Euro Area and Turkey Business Cycles: a Bayesian DSGE Approach

This paper estimates a New Keynesian DSGE model for the Euro Area and the Turkish economy using Bayesian estimation techniques and seven macroeconomic time series. The setting of the model features a number of nominal and real frictions and seven structural shocks are introduced. An analysis of the response of the two economies to these types of shocks is provided in a comparative fashion along with a study of the driving forces of the main macroeconomic dynamics through shock decomposition, with a focus on output and consumption.