Abstract: Based on the Bayesian method and shock response method, this paper conducts an assessment of the friction mechanism in the classical CEE model, so as to determine which mechanisms in the model are important and indispensable for the analysis of the Chinese economy. Based on the Bayesian method, it firstly carries out a Bayesian estimation of CEE model when different frictional factors are removed. Compared with its edge likelihood function, it is found that the model mechanism with the strongest explanatory power to Chinese data is price stickiness and investment adjustment cost, followed by formation of habit and wage stickiness, while such factors as capital utilization adjustment costs, price and wage index are not important. Finally, based on the shock response method, it examines the response curves of the three impacts of CEE model on money, technology and government expenditure, the findings can further confirm the conclusion drawn from the Bayesian evaluation.

Key words: DSGE model; price stickiness; investment adjustment cost; Bayesian method; shock response analysis