Note on a medium-scale DSGE model with fiscal and monetary policy

During the ten years before the Globe Financial Crisis, the most common framework employed in Macroeconomics had incorporated price/wage rigidity into the DSGE models. We developed a basic medium-scale NK model following Sims,E.(2017, Course notes,A New Keyesian Model with price stickiness). Currently, the extensions of these models are employed extensively by governmental sectors to conduct policy analysis. The pioneering medium scale DSGE models are Christiano, Eichenbaum and Evans(2005,JPE) and Smets and Wouters(2007,AER).

Traditional New Keyesian model is mainly used for analyzing the impact of monetary policy. However, in our model, we focus on not only Monetary Policy (the Taylor Rule), but also fiscal policy, including procyclical government expenditure, value-added tax, capital gain tax, and labor income tax policies. 

The main characters of our model are:

Physical capital accumulation
  Price stickiness
  Wage stickiness
 Backward indexation of non-updated prices and wages
 Habit formation in consumption
  Investment adjustment costs
  Variable capital utilization
  A fixed cost of production
 Monetary policy conducted according to a Taylor rule
 The following fiscal policies:
  [a] Governmental consumption spending
   [b] Added value tax
   [c] Progressive labor income tax
    [d] Progressive capital rent tax
 The following shocks:
[a] Productive
   [b] Marginal efficiency of investment
  [c] Governmental expenditure
    [d] Added value tax
   [e] labor income tax
   [f] capital rent tax
   [g] Monetary policy
   [h] Intertemporal preferences
   [i] Intratemporal preferences(labor supply)

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