Latin American Journal of Central Banking (Jun 2024)

Brazilian macroeconomic dynamics redux: Shocks, frictions, and unemployment in SAMBA model

  • Angelo M. Fasolo,
  • Eurilton Araujo,
  • Marcos Valli Jorge,
  • Alexandre Kornelius,
  • Leonardo Sousa Gomes Marinho

Journal volume & issue
Vol. 5, no. 2
p. 100110

Abstract

Read online

This paper documents the recent changes in the structure and estimation procedures of the SAMBA model, providing a complete description of the decision problems that each economic agent faces, the first order conditions that solve those problems, and the new techniques employed to estimate the model. This updated version of the model incorporates new features, such as involuntary unemployment, imported goods in the consumption bundle and a new identified vector auto-regressive process for the rest of the world. Reflecting these changes, the set of observables was expanded to include, for instance, participation rates in the labor market and an exogenous measure of output gap. In face of increased complexity and the large number of observables, the model was estimated using Sequential Monte Carlo (SMC) methods, allowing for a smaller sensitivity to the choice of priors.

Keywords