DSGE Models for Monetary Policy Analysis

Christiano, Lawrence J.; Trabandt, Mathias; Walentin, Karl

doi:10.2139/ssrn.1680621

Cited by 74 publications

(79 citation statements)

References 93 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…We furthermore assume that when borrowing from abroad, home households must pay a risk premium t . We follow Christiano et al (2011) in assuming that t depends on the home country's position in the international asset market and on the international interest rate di¤erential:…”

Section: Incomplete Marketsmentioning

confidence: 99%

“…14 The risk premium payments are distributed evenly to foreign households. The home household's budget constraint becomes …”

Section: Incomplete Marketsmentioning

confidence: 99%

“…16 We set N F D = 0, r = 1:10, and V ar (" ) = 3:9 10 5 , as in Christiano et al (2011). We calibrate the elasticity of the risk premium to the level of international debt, d , to replicate the volatility of current account to GDP ratio observed in the U.S. data.…”

Section: Calibrationmentioning

confidence: 99%

“…where the prices of tradables evolve according to (14) and its foreign economy equivalent. The real exchange rate ‡uctuates due to (a) movements of the nominal exchange rate S t ; (b) presence of nontraded goods ( > 0); (c) di¤erences in the composition of the tradable baskets ( 6 = 1 );…”

Section: Sources Of Real Exchange Rate Dynamicsmentioning

confidence: 99%

See 3 more Smart Citations

Causes of nonlinearities in low-order models of the real exchange rate

Ahmad

Mykhaylova

2013

Journal of International Economics

View full text Add to dashboard Cite

This paper investigates the extent to which modern DSGE models, which feature local currency pricing, home bias, nontraded goods and incomplete markets, can generate nonlinear real exchange rate dynamics that are consistent with those found in the time series literature using data from the current ‡oating period. Our key …ndings are as follows. First, if the solution to the DSGE model is approximated to the …rst order, then linearity tests that utilize univariate autoregressions of the real exchange rate su¤er from an omitted variables problem, which leads them to overestimate the true incidence of nonlinearity. Consequently, studies that fail to control for this problem may spuriously …nd evidence of nonlinearities in the data, despite the fact that the data generating process may be linear. Second, we propose a strategy that can largely eliminate this distortion. Finally, we …nd that DSGE models solved using higher order approximations are capable of generating true structural nonlinearities in real exchange rates both asymptotically and in short samples.JEL Classi…cation: C15 C32 F41 F47

show abstract

Section: Incomplete Marketsmentioning

confidence: 99%

“…14 The risk premium payments are distributed evenly to foreign households. The home household's budget constraint becomes …”

Section: Incomplete Marketsmentioning

confidence: 99%

Section: Calibrationmentioning

confidence: 99%

Section: Sources Of Real Exchange Rate Dynamicsmentioning

confidence: 99%

See 2 more Smart Citations

Causes of nonlinearities in low-order models of the real exchange rate

Ahmad

Mykhaylova

2013

Journal of International Economics

View full text Add to dashboard Cite

show abstract

“…Indeed, Christiano et al (2010) show that dynamic stochastic general equilibrium (DSGE) models can identify and explain business cycle dynamics as well as demonstrate how economic shocks a¤ect the economy. 1 However, by developing the now standard New Keynesian DSGE models for the Eurozone and United States, and by excluding money shocks from their model(s), Wouters (2003, 2007) do not assign money an explicit role with regard to economic dynamics.…”

Section: Introductionmentioning

confidence: 99%

Money and monetary policy in Israel during the last decade

Benchimol¹

2016

Journal of Policy Modeling

View full text Add to dashboard Cite

This study examines how money and monetary policy have in‡uenced output and in ‡ation during the past decade in Israel by comparing two New Keynesian DSGE models. One is a baseline separable model (Galí, 2008) and the other assumes non-separable household preferences between consumption and money (Benchimol and Fourçans, 2012). We test both models by using rolling window Bayesian estimations over the last decade (2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009)(2010)(2011)(2012)(2013). The results of the presented dynamic analysis show that the sensitivity of output with respect to money shocks increased during the Dot-com, Intifada, and Subprime crises. The role of monetary policy increased during these crises, especially with regard to in ‡ation, even though the effectiveness of conventional monetary policy decreased during the Subprime crisis. In addition, the non-separable model including money provides lower forecast errors than the baseline separable model without money, while the in ‡uence of money on output ‡uctuations can be seen as a good predictive indicator of bank and debt risks. By impacting and monitoring households'money holdings, policy makers could improve their forecasts and crisis management through models considering monetary aggregates.

show abstract

How the baby boomers' retirement wave distorts model‐based output gap estimates

Wolters

2018

J of Applied Econometrics

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Hours per capita measures based on the private sector as usually included in the set of observables for estimating macroeconomic models are affected by low-frequent demographic trends and sectoral shifts that cannot be explained by standard models. Further, model-based output gap estimates are closely linked to the observable hours per capita series. Hence, hours per capita that are not measured in concordance with the model assumptions can distort output gap estimates. This paper shows that sectoral shifts in hours and the changing share of prime age individuals in the working-age population lead indeed to erroneous output gap dynamics. Regarding the aftermath of the global financial crisis model-based output gaps estimated using standard hours per capita series are persistently negative for the US economy. This is not caused by a permanently depressed economy, but by the retirement wave of baby boomers which lowers aggregate hours per capita. After adjusting hours for changes in the age composition to bring them in line with the model assumptions, the estimated output gap gradually closes in the years following the global financial crisis. Terms of use: Documents in

show abstract

DSGE Models for Monetary Policy Analysis

Cited by 74 publications

References 93 publications

Causes of nonlinearities in low-order models of the real exchange rate

Causes of nonlinearities in low-order models of the real exchange rate

Money and monetary policy in Israel during the last decade

How the baby boomers' retirement wave distorts model‐based output gap estimates

Contact Info

Product

Resources

About