We estimate a dynamic stochastic general equilibrium model that allows for regimes
Markov switching (MS-DSGE). Existing MS-DSGE papers for the United States
focus on changes in monetary policy or shocks volatility, contributing the debate on
the Great Moderation and/or Volcker disinflation. However, Poland which here
serves as an example of a transition country, faced a wider range of structural changes,
including long disinflation, EU accession or tax changes.
The model identifies high and low rigidity regimes, with the timing consistent
with menu cost explanation of nominal rigidities. Estimated timing of the regimes
captures the European Union accession and indirect tax changes. The Bayesian model
comparison results suggest that model with switching in both analyzed rigidities is
strongly favored by the data in comparison with switching only in prices or in wages.
Moreover, we find significant evidence in support of independent Markov chains.