We calibrate a standard New Keynesian model with three alternative representations of monetary policy- an optimal timeless rule, a Taylor rule and another with interest rate smoothing- with the aim of testing which if any can match the data according to the method of indirect inference. We find...

This paper gives money a role in providing cheap collateral in a model of banking; besides the Taylor Rule, monetary policy can affect the risk-premium on bank lending to firms by varying the supply of M0, so at the zero bound monetary policy is effective; fiscal policy crowds out investment via...

DSGE models based on New Keynesian principles, which have been extended to allow for banking, the zero lower bound on interest rates (ZLB), and varying price duration, can account well for recent macroeconomic behavior across a variety of economies. These models Önd that active Öscal policy...

This paper develops a model of the Chinese economy using a DSGE framework that accommodates a banking sector and money. The model is used to shed light on the period of the recent period of financial crisis. It differs from other applications in the use of indirect inference to estimate and test...

Using indirect inference based on a VAR we confront US data from 1972 to 2007 with a standard New Keynesian model in which an optimal timeless policy is substituted for a Taylor rule. We find the model explains the data both for the Great Acceleration and the Great Moderation. The implication is...

We construct a macro DSGE model of the eurozone and its two main regions, the North and the South, with the aim of matching the macro facts of these economies by indirect inference and using the resulting empirically-based model to assess possible new policy regimes. The model we have found to...

Considerable micro-level evidence suggests that price/wage contract durations fluctuate with the state of the economy, particularly inflation; nonetheless, macro-level evidence for this is scarce. We incorporate state-dependent price/wage setting into an open economy DSGE model to investigate...

Since the channel for agents' expectations matters for the effectiveness of monetary policies, it is crucial for policy-makers to assess the degree to which economic agents are boundedly rational and understand how the bounded rationality affects the monetary rules in stabilising the economy. We...