An Interregional Dynamic Stochastic General Equilibrium Model

This paper develops a dynamic stochastic general equilibrium (DSGE) model for the Russian economy, disaggregated into two regions: the Central Federal District (CFD) and the rest of Russia. We motivate the study by highlighting its relevance and significance, and provide a review of existing literature in the field. The model incorporates key economic agents to ensure comprehensiveness and realism, including households (whose behavior is described using the Euler equation), firms producing goods via a Cobb-Douglas production function, investment producers, the government, and the Central Bank. The analysis focuses on the contributions of various factors to the dynamics of the output gap and inflation. Particular attention is paid to the specific characteristics of the CFD, allowing for a more accurate representation of regional disparities and their impact on aggregate economic dynamics. The paper details the model construction, presents the results of our analysis, and concludes with implications for economic policy and forecasting.

dynamic stochastic general equilibrium model, Central Federal District economy, monetary policy, regional heterogeneity, factor analysis