Money and Monetary Policy in Dynamic Stochastic General Equilibrium Models

Arnab Bhattacharjee, Christoph Thoenissen

    Research output: Contribution to conferencePaper

    5 Citations (Scopus)
    117 Downloads (Pure)

    Abstract

    We compare three methods of motivating money in New Keynesian DSGE Models: Money-in-the-utility function, shopping time and cash-in-advance constraint, as well as two ways of modelling monetary policy, interest rate feedback rule and money growth rules. We use impulse response analysis, and a set of econometric distance measures based on comparing model and data variance-covariance matrices to compare the different models. We find all models closed by an estimated interest rate feedback rule imply counter-cyclical policy and inflation rates, which is at odds with the data. This problem is robust to the introduction of demand side shocks, but is not a feature of models closed by an estimated money growth rule. Drawing on our econometric analysis, we argue that the cash-in-advance model, closed by a money growth rule, comes closest to the data
    Original languageEnglish
    Number of pages35
    Publication statusPublished - 2007
    EventMoney Macro and Finance (MMF) Research Group 38th Annual Conference 2006 - York, United Kingdom
    Duration: 13 Sep 200615 Sep 2006

    Conference

    ConferenceMoney Macro and Finance (MMF) Research Group 38th Annual Conference 2006
    CountryUnited Kingdom
    CityYork
    Period13/09/0615/09/06

    Keywords

    • Intertemporal macroeconomics
    • role of money
    • Monetary policy
    • model selection
    • moment matching

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  • Research Output

    • 5 Citations
    • 1 Meeting abstract

    Money and monetary policy in dynamic stochastic general equilibrium models

    Bhattacharjee, A. & Thoenissen, C., 1 Sep 2007, In : Manchester School. 75, S1, p. 88-122 35 p.

    Research output: Contribution to journalMeeting abstract

  • 5 Citations (Scopus)

    Cite this

    Bhattacharjee, A., & Thoenissen, C. (2007). Money and Monetary Policy in Dynamic Stochastic General Equilibrium Models. Paper presented at Money Macro and Finance (MMF) Research Group 38th Annual Conference 2006, York, United Kingdom. http://ideas.repec.org/p/mmf/mmfc06/78.html