Download or read book Money Interest and Policy written by Jean-Pascal Bénassy and published by MIT Press. This book was released on 2007 with total page 215 pages. Available in PDF, EPUB and Kindle. Book excerpt: An important recent advance in macroeconomics is the development of dynamic stochastic general equilibrium (DSGE) macromodels. The use of DSGE models to study monetary policy, however, has led to paradoxical and puzzling results on a number of central monetary issues including price determinacy and liquidity effects. In Money, Interest, and Policy, Jean-Pascal Benassy argues that moving from the standard DSGE models - which he calls "Ricardian" because they have the famous "Ricardian equivalence" property-to another, "non-Ricardian" model would resolve many of these issues. A Ricardian model represents a household as a homogeneous family of infinitely lived individuals, and Benassy demonstrates that a single modification-the assumption that new agents are born over time (which makes the model non-Ricardian)-can bridge the current gap between monetary intuitions and facts, on one hand, and rigorous modeling, on the other. After comparing Ricardian and non-Ricardian models, Benassy introduces a model that synthesizes the two approaches, incorporating both infinite lives and the birth of new agents. Using this model, he considers a number of issues in monetary policy, including liquidity effects, interest rate rules and price determinacy, global determinacy, the Taylor principle, and the fiscal theory of the price level. Finally, using a simple overlapping generations model, he analyzes optimal monetary and fiscal policies, with a special emphasis on optimal interest rate rules

Download or read book Money and Monetary Policy in Dynamic Stochastic General Equilibrium Models written by Arnab Bhattacharjee and published by . This book was released on 2007 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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 modeling 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.

Download or read book Handbook of Computable General Equilibrium Modeling written by Peter B. Dixon and published by Newnes. This book was released on 2013-11-14 with total page 1143 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this collection of 17 articles, top scholars synthesize and analyze scholarship on this widely used tool of policy analysis, setting forth its accomplishments, difficulties, and means of implementation. Though CGE modeling does not play a prominent role in top US graduate schools, it is employed universally in the development of economic policy. This collection is particularly important because it presents a history of modeling applications and examines competing points of view. Presents coherent summaries of CGE theories that inform major model types Covers the construction of CGE databases, model solving, and computer-assisted interpretation of results Shows how CGE modeling has made a contribution to economic policy

Download or read book Macroeconomics and Consumption written by John Muellbauer and published by . This book was released on 2016 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: The failure of the ubiquitous New Keynesian "Dynamic Stochastic General Equilibrium" (NK-DSGE) models to capture interactions of finance and the real economy is widely-recognized since the 2008-9 financial crisis. NK-DSGE models exclude money, debt and asset prices and, importantly, ignore changing credit markets. These problems stem from assuming unrealistic micro-foundations for household behaviour, and that aggregate behaviour mimics a fully-informed "representative agent" (both assumptions are embodied in the underlying "rational expectations permanent income" hypothesis (REPIH)). This survey critiques the NK-DSGE models and its integral REPIH model, and discusses alternative post-crisis general equilibrium models which do incorporate debt and allow crises to occur. But neither model type can be directly applied to policy-making. The survey reviews misspecifications in standard non-DSGE macro-models used by central banks (e.g. the Fed.'s FRB-US), and related co-integration literature linking consumption with household portfolios. These too omit most of the "financial accelerator", ignoring credit shifts and crucially, aggregating liquid, illiquid assets, debt and housing into a single "net worth" construct. The survey's second focus is to improve non-DSGE models for policy using the Latent Interactive Variable Equation System (LIVES) approach, in which aggregate consumption is jointly modelled with the main elements of household balance sheets, extracting credit conditions as a latent variable. Empirical work on aggregate data is surveyed revealing the important role of debt and financial assets and the time and context-dependent role of housing collateral. Rather than "one-size-fits-all" monetary and macro-prudential policy, institutional differences between countries then imply major differences for monetary policy transmission and policy.

Download or read book Policy Risk and Spillover Analysis in the World Economy written by Francis Vitek and published by International Monetary Fund. This book was released on 2017-04-04 with total page 122 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a structural macroeconometric model of the world economy, disaggregated into forty national economies, to facilitate multilaterally consistent macrofinancial policy, risk and spillover analysis. This panel dynamic stochastic general equilibrium model features a range of nominal and real rigidities, extensive macrofinancial linkages, and diverse spillover transmission channels. These macrofinancial linkages encompass bank and capital market based financial intermediation, with financial accelerator mechanisms linked to the values of the housing and physical capital stocks. A variety of monetary policy analysis, fiscal policy analysis, macroprudential policy analysis, spillover analysis, and forecasting applications of the estimated model are demonstrated. These include quantifying the monetary, fiscal and macroprudential transmission mechanisms, accounting for business cycle fluctuations, and generating relatively accurate forecasts of inflation and output growth.

Download or read book Monetary and Fiscal Policy through a DSGE Lens written by Harold L. Cole and published by Oxford University Press. This book was released on 2020-02-24 with total page 272 pages. Available in PDF, EPUB and Kindle. Book excerpt: In Monetary and Fiscal Policy Through a DSGE Lens, Harold L. Cole develops and extends versions of a classic quantitative model of economic growth to take on a wide range of topics in monetary and fiscal policy. Bridging the gap between current undergraduate and graduate texts in the field, this comprehensive book covers the basic elements of advanced macroeconomics and equips readers to understand the debate on key policy questions. By using the simple DSGE, or dynamic stochastic general equilibrium, framework to build a series of quantitative models, the book combines a gradual introduction to advanced analytic methods with computer programming and quantitative policy analysis. In a clear discussion of the sophisticated interaction between theory and data, Cole explains how to gauge how well a model captures key elements in the data and how to reverse engineer a model to data. The book covers costs of inflation, optimal monetary policy, the impact of labor and capital taxes, and optimal fiscal policy. It systematically discusses technical material including the new Keynesian liquidity shock models, standard analytic methods, such as Lagrangian methods, and computational methods using Matlab and Python. With a strong computational emphasis, the volume teaches how to program up and solve systems of non-linear equations and develop models to study the macroeconomy. Knowing how to deeply understand and analyze models and develop computational code to evaluate the implications of those models is essential for students of macroeconomics. This book connects the standard undergraduate material to the elaborate models of advanced graduate courses with systematic and logical coverage of the basics of advanced modern macroeconomics.

Download or read book Monetary Policy Regimes and Beliefs written by David Andolfatto and published by . This book was released on 2003 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This article investigates the role of beliefs over monetary policy in propagating the effects of monetary policy shocks within the context of a dynamic, stochastic general equilibrium model. In our model, monetary policy periodically switches between low and high money growth regimes. When individuals are unable to observe the regime directly, they form inferences over regime-type based on historical money growth rates. For an empirically plausible money growth process, beliefs evolve slowly in the wake of a regime change. As a result, our model is able to capture some of the observed persistence of real and nominal variables following such a regime change.

Download or read book Collected Papers on Monetary Theory written by Robert E. Lucas Jr. and published by Harvard University Press. This book was released on 2013-01-07 with total page 517 pages. Available in PDF, EPUB and Kindle. Book excerpt: Robert Lucas is one of the outstanding monetary theorists of the past hundred years. Along with Knut Wicksell, Irving Fisher, John Maynard Keynes, James Tobin, and Milton Friedman (his teacher), Lucas revolutionized our understanding of how money interacts with the real economy of production, consumption, and exchange. Lucas’s contributions are both methodological and substantive. Methodologically, he developed dynamic, stochastic, general equilibrium models to analyze economic decision-makers operating through time in a complex, probabilistic environment. Substantively, he incorporated the quantity theory of money into these models and derived its implications for money growth, inflation, and interest rates in the long run. He also showed the different effects of anticipated and unanticipated changes in the stock of money on economic fluctuations, and helped to demonstrate that there was not a long-run trade-off between unemployment and inflation (the Phillips curve) that policy-makers could exploit. The twenty-one papers collected in this volume fall primarily into three categories: core monetary theory and public finance, asset pricing, and the real effects of monetary instability. Published between 1972 and 2007, they will inspire students and researchers who want to study the work of a master of economic modeling and to advance economics as a pure and applied science.

Download or read book Policy and Spillover Analysis in the World Economy written by Francis Vitek and published by International Monetary Fund. This book was released on 2014-10-30 with total page 95 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a structural macroeconometric model of the world economy, disaggregated into forty national economies. This panel dynamic stochastic general equilibrium model features a range of nominal and real rigidities, extensive macrofinancial linkages, and diverse spillover transmission channels. A variety of monetary policy analysis, fiscal policy analysis, spillover analysis, and forecasting applications of the estimated model are demonstrated. These include quantifying the monetary and fiscal transmission mechanisms, accounting for business cycle fluctuations, and generating relatively accurate forecasts of inflation and output growth.

Download or read book Data Rich DSGE and Dynamic Factor Models written by Mr.Maxym Kryshko and published by International Monetary Fund. This book was released on 2011-09-01 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: Dynamic factor models and dynamic stochastic general equilibrium (DSGE) models are widely used for empirical research in macroeconomics. The empirical factor literature argues that the co-movement of large panels of macroeconomic and financial data can be captured by relatively few common unobserved factors. Similarly, the dynamics in DSGE models are often governed by a handful of state variables and exogenous processes such as preference and/or technology shocks. Boivin and Giannoni(2006) combine a DSGE and a factor model into a data-rich DSGE model, in which DSGE states are factors and factor dynamics are subject to DSGE model implied restrictions. We compare a data-richDSGE model with a standard New Keynesian core to an empirical dynamic factor model by estimating both on a rich panel of U.S. macroeconomic and financial data compiled by Stock and Watson (2008).We find that the spaces spanned by the empirical factors and by the data-rich DSGE model states are very close. This proximity allows us to propagate monetary policy and technology innovations in an otherwise non-structural dynamic factor model to obtain predictions for many more series than just a handful of traditional macro variables, including measures of real activity, price indices, labor market indicators, interest rate spreads, money and credit stocks, and exchange rates.

Download or read book Monetary and Macroprudential Policy Rules in a Model with House Price Booms written by Mr.Pau Rabanal and published by International Monetary Fund. This book was released on 2009-11-01 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: We argue that a stronger emphasis on macrofinancial risk could provide stabilization benefits. Simulations results suggest that strong monetary reactions to accelerator mechanisms that push up credit growth and asset prices could help macroeconomic stability. In addition, using a macroprudential instrument designed specifically to dampen credit market cycles would also be useful. But invariant and rigid policy responses raise the risk of policy errors that could lower, not raise, macroeconomic stability. Hence, discretion would be required.

Download or read book Bayesian Estimation of DSGE Models written by Edward P. Herbst and published by Princeton University Press. This book was released on 2015-12-29 with total page 295 pages. Available in PDF, EPUB and Kindle. Book excerpt: Dynamic stochastic general equilibrium (DSGE) models have become one of the workhorses of modern macroeconomics and are extensively used for academic research as well as forecasting and policy analysis at central banks. This book introduces readers to state-of-the-art computational techniques used in the Bayesian analysis of DSGE models. The book covers Markov chain Monte Carlo techniques for linearized DSGE models, novel sequential Monte Carlo methods that can be used for parameter inference, and the estimation of nonlinear DSGE models based on particle filter approximations of the likelihood function. The theoretical foundations of the algorithms are discussed in depth, and detailed empirical applications and numerical illustrations are provided. The book also gives invaluable advice on how to tailor these algorithms to specific applications and assess the accuracy and reliability of the computations. Bayesian Estimation of DSGE Models is essential reading for graduate students, academic researchers, and practitioners at policy institutions.

Download or read book Dynamic Stochastic General Equilibrium Models and Money Market Interest Rates written by Norman Kuhlmann and published by . This book was released on 2009 with total page 104 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Introduction to Dynamic Macroeconomic General Equilibrium Models Second Edition written by José L. Torres and published by Vernon Press. This book was released on 2020-10-06 with total page 282 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book offers an introductory step-by-step course in Dynamic Stochastic General Equilibrium (DSGE) modelling. Modern macroeconomic analysis is increasingly concerned with the construction, calibration and/or estimation and simulation of DSGE models. The book is intended for graduate students as an introductory course to DSGE modelling and for those economists who would like a hands-on approach to learning the basics of modern dynamic macroeconomic modelling. The book starts with the simplest canonical neoclassical DSGE model and then gradually extends the basic framework incorporating a variety of additional features, such as consumption habit formation, investment adjustment cost, investment-specific technological change, taxes, public capital, household production, non-ricardian agents, monopolistic competition, etc. The book includes Dynare codes for the models developed that can be downloaded from the book’s homepage. The second edition is identical to the first with the exception of a revised appendix to Chapter 2. The revised appendix can be downloaded free of charge in the accompanying downloads section.

Download or read book The Liquidity Effect in a Flexible Price Monetary Model written by Shiu-Sheng Chen and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the impact of macroeconomic policy shocks in a flexible-price dynamic stochastic general equilibrium (DSGE) model with money. Rather than adopting a money supply rule, monetary policy is modelled as a central bank using a simple interest rate rule (Taylor rule). Without assuming price stickiness or frictions in financial markets, this model is found to account for liquidity effects, generate higher persistence in output and inflation, and capture the positive unconditional cross-correlations relating inflation and output.

Download or read book Financial Crises in DSGE Models written by Mr.Jaromir Benes and published by International Monetary Fund. This book was released on 2014-04-04 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents the theoretical structure of MAPMOD, a new IMF model designed to study vulnerabilities associated with excessive credit expansions, and to support macroprudential policy analysis. In MAPMOD, bank loans create purchasing power that facilitates adjustments in the real economy. But excessively large and risky loans can impair balance sheets and sow the seeds of a financial crisis. Banks respond to losses through higher spreads and rapid credit cutbacks, with adverse effects for the real economy. These features allow the model to capture the basic facts of financial cycles. A companion paper studies the simulation properties of MAPMOD.

Download or read book An Estimated DSGE Model for Monetary Policy Analysis in Low Income Countries written by Shanaka J. Peiris and published by International Monetary Fund. This book was released on 2007 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper evaluates monetary policy-tradeoffs in low-income countries using a dynamic stochastic general equilibrium (DSGE) model estimated on data for Mozambique taking into account the sources of major exogenous shocks, and level of financial development. To our knowledge this is a first attempt at estimating a DSGE model for Sub-Saharan Africa excluding South Africa. Our simulations suggests that a exchange rate peg is significantly less successful than inflation targeting at stabilizing the real economy due to higher interest rate volatility, as in the literature for industrial countries and emerging markets.