Money in an Estimated Business Cycle Model of the Euro Area

By Javier Andrés, J. López-Salido, Javier Vallés. 2006

131 citations recorded by the source corpus.

This article examines the role of money in a small-scale dynamic general equilibrium model of the euro zone estimated by maximum likelihood. The model allows for both intertemporal and intratemporal non-separability in preferences. We find, first, that real balances do not affect the marginal utility of consumption. Second, money demand shocks mainly help to forecast real balances while real shocks explain the bulk of price, output and interest rates fluctuations. Third, the calculation of the natural rate of interest reveals that the evolution of the interest rate is mostly accounted for by the real sources of fluctuations.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/d11c18ca2852e6d8e79575e54e56c73dec53db4f

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

Citations in the corpus

Optimal Monetary Policy Rules with Labor Market Frictions (2008, background): “ct + bt pt ≤ wt + but + Θt pt − τ t pt + (1 + r t−1) bt−1 pt (2) Households choose the set of processes {ct, bt}t=0 taking as given the set of processes {pt, wt, rn t }t=0 and the initial wealth b0,so as to maximize (1) subject to (2).”
Money and the natural rate of interest: structural estimates for the United States and the Euro area (2007, unknown): “The maximum likelihood estimation procedure follows Hansen and Sargent (1997) and later applications can be found in Kim (2000) and Ireland (2001, 2004).”
Central Bank Misperceptions and the Role of Money in Interest Rate Rules (2008, methodology): “A possible route for further analysis would be to follow Svensson and Woodford (2003) and Wieland (2006) in studying policy performance using cal16Ireland (2004) and Andres et al. (2006) investigate the direct role of money balances in output and inflation determination. They suggest that such direc”
New Consensus Macroeconomics: A Critical Appraisal (2009, unknown): “The empirical work undertaken by Ireland (2004), Andres, Lopez-Salido, and Valles (2006), and Jones and Stracca (2008) suggest that there is little evidence that supports the inclusion of real money balances in equation (1) in the cases of the United States, the euro area, and the UK.”