Energy price shocks in dynamic stochastic general equilibrium : the case of Bangladesh.

Abstract

We investigate the role of energy price shocks on business cycle fl uctuations in Bangladesh. In doing so, we calibrate a Dynamic Stochastic General Equilibrium (DSGE) model, allowing for both energy consumption by households and as an input in production. We fi nd that qualitatively temporary energy price shocks and technology shocks produce similar impulse response functions, as well as similar (quantitatively) autocorrelations in aggregate quantities. The variance in aggregate quantities are better explained by technology shocks than by energy price shocks, suggesting that technology shocks are more important source of fl uctuations in Bangladesh.