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The aim of this work is to compare and contrast different ways of modeling financial shocks and financial intermediaries in the Dynamic Stochastic General Equilibrium models (DSGE models) and to discuss the empirical evidence on the importance of modeling financial sector and financial shocks in...
Persistent link: https://www.econbiz.de/10013142856
We present evidence of significant bias in event studies that investigate the effect of U.S. monetary policy on U.S. stock prices. To overcome this bias, we propose a new identification method based on the "Impossible Trinity" theory which argues that an economy with a fixed exchange rate and...
Persistent link: https://www.econbiz.de/10013075805
Latin American economies are exposed to substantial external vulnerability. Domestic imbalances and terms of trade shocks are often exacerbated by sudden stops of capital inflow. In this paper we explore ways of overcoming external vulnerability, drawing lessons from a detailed comparison of the...
Persistent link: https://www.econbiz.de/10014071653
This paper describes NEMO, the main dynamic stochastic general equilibrium model used at Norges Bank for monetary policy analysis and forecasting. NEMO has been used to identify the sources of business cycle fluctuations in Norway, to conduct scenario analysis, to produce macroeconomic...
Persistent link: https://www.econbiz.de/10012115010
Research on disaggregate price indices has found that sectoral shocks generate the bulk of sectoral inflation variance, but no persistence. Aggregate shocks, by contrast, are the root of sectoral inflation persistence, but have negligible relative variance. We argue that these findings are...
Persistent link: https://www.econbiz.de/10010320780
In the empirical literature, monetary policy shocks are commonly measured as an innovation to a short-term nominal interest rate. In contrast, the majority of monetary business cycle models treats a broad monetary aggregate as the central bank's policy measure. We try overcome this disparity and...
Persistent link: https://www.econbiz.de/10010292749
We use a novel disaggregate sectoral euro area dataset with a regional breakdown that allows explicit estimation of the sectoral component of price changes (rather than interpreting the idiosyncratic component as sectoral as done in other papers). Employing a new method to extract factors from...
Persistent link: https://www.econbiz.de/10010303757
In most instances, the dynamic response of monetary and other policies to shocks is infrequent and lumpy. The same holds for the microeconomic response of some of the most important economic variables, such as investment, labor demand, and prices. We show that the standard practice of estimating...
Persistent link: https://www.econbiz.de/10010369179
This paper develops and estimates a dynamic stochastic general equilibrium (DSGE) model with sticky prices and wages for the euro area. The model incorporates various other features such as habit formation, costs of adjustment in capital accumulation and variable capacity utilisation. It is...
Persistent link: https://www.econbiz.de/10011506557
Using a Bayesian likelihood approach, we estimate a dynamic stochastic general equilibrium model for the US economy using seven macro-economic time series. The model incorporates many types of real and nominal frictions and seven types of structural shocks. We show that this model is able to...
Persistent link: https://www.econbiz.de/10011506630