Money and monetary policy in dynamic stochastic general equilibrium models

Arnab Bhattacharjee, Christoph Thoenissen

    Research output: Contribution to journalArticlepeer-review

    5 Citations (Scopus)

    Abstract

    We compare two methods of motivating money in New Keynesian dynamic stochastic general equilibrium models-money-in-the-utility function and the cash-in-advance (CIA) constraint-as well as two ways of modelling monetary policy: the interest rate feedback rule and money growth rules. As an aid to model selection, we use a new econometric measure of the distance between model and data variance-covariance matrices. The proposed measure is useful in distinguishing between alternative general equilibrium models. Drawing on our econometric analysis, we argue that the CIA model, closed by a money growth rule, comes closest to the data.

    Original languageEnglish
    Pages (from-to)88-122
    Number of pages35
    JournalManchester School
    Volume75
    Issue numberS1
    DOIs
    Publication statusPublished - Sept 2007

    Keywords

    • SAMPLE COVARIANCE-MATRIX
    • BUSINESS-CYCLE MODELS
    • STATISTICAL-INFERENCE
    • CALIBRATED MODELS
    • STICKY PRICES
    • DISTRIBUTIONS
    • EIGENVALUES
    • PERSISTENCE
    • FRAMEWORK

    Fingerprint

    Dive into the research topics of 'Money and monetary policy in dynamic stochastic general equilibrium models'. Together they form a unique fingerprint.

    Cite this