MONETARY POLICY AND SUNSPOT FLUCTUATIONS IN THE UNITED STATES AND THE EURO AREA

2012 ◽  
Vol 17 (1) ◽  
pp. 1-28 ◽  
Author(s):  
Yasuo Hirose
Keyword(s):  
United States ◽  
Monetary Policy ◽  
Euro Area ◽  
Open Economy ◽  
The United States ◽  
Dynamic Stochastic General Equilibrium ◽  
New Keynesian ◽  
Bayesian Techniques ◽  
Dynamic Stochastic ◽  
Substantial Degree

We estimate a two-country open economy version of the New Keynesian dynamic stochastic general equilibrium model for the United States and the Euro area, using Bayesian techniques that allow for both determinacy and indeterminacy of the equilibrium. Empirical analysis shows that the worldwide equilibrium is indeterminate due to a passive monetary policy in the Euro area, even if U.S. policy is aggressive enough. We demonstrate that the impulse responses under indeterminacy exhibit dynamics different from those under determinacy and that sunspot shocks affect the Euro economy to a substantial degree, whereas the transmission of sunspots to the United States is limited.

scholarly journals Thai Monetary Policy Under the Inflation Targeting Regime

2020 ◽  
Author(s):  
Nipit Wongpunya
Keyword(s):  
Monetary Policy ◽  
Steady State ◽  
Inflation Targeting ◽  
Aggregate Demand ◽  
State Level ◽  
Dynamic Stochastic General Equilibrium ◽  
New Keynesian ◽  
Keynesian Model ◽  
Trend Inflation ◽  
Dynamic Stochastic

Abstract This paper explores the macroeconomic effects of inflation targeting in Thailand. Furthermore, this study uses a nonlinear new Keynesian model under the dynamic stochastic general equilibrium framework with price indexation to analyze the monetary policy under inflation targeting in Thailand. The model is estimated using a Bayesian statistic for the Thai economy. It shows that inflation is more stabilized and inflation persistence has fallen after adopting inflation targeting. The paper also indicates that the Bank of Thailand is more responsive to the deviation of inflation from its target using inflation targeting. The key monetary mechanism exists through changes in the real interest rate which affect aggregate demand. It is worth noting that the larger the inflation targeting rate is, the lower the steady state output from its steady state level given no trend inflation.

scholarly journals The Money Neutrality Proposition: Is Boosting Money Supply A Solution To US Economic Problems?

2013 ◽  
Vol 29 (2) ◽  
pp. 361
Author(s):  
Jean Emmanuel Fonkoua
Keyword(s):  
United States ◽  
Monetary Policy ◽  
Money Supply ◽  
Foreign Exchange ◽  
Open Economy ◽  
Well Being ◽  
The United States ◽  
Reduced Form ◽  
Industrialized Countries ◽  
Final Prediction Error

This paper unfastens the new classical structural model and broadens the reduced form output equation to investigate the money neutrality proposition in the United States. The hypothesis that any predictable monetary policy has no influence on output is extended by the inclusion of foreign exchange rationing to the supply side of the economy as cointegrated with money supply. The final prediction error determines the proper lag length that is used by the dynamic analysis to examine the causality relationship between imports, foreign price, foreign income, and output. The vector autoregressive is used to determine the exogeneity property of foreign exchange and output; it also helps extract the anticipated and unanticipated components of foreign exchange and money series. Empirical evidence provides considerable support for short run cyclical movements in the output of highly industrialized countries in affecting the real output in the United States. Indeed, any policy response in raising output should take into account the well-being of other developed countries. Predicted or not, an increase in the level of growth of other advanced countries does not leads to offsetting expectation and results in raising the economic growth. Empirical test presents no evidence that boosting the money supply leads to an increase in the level of growth. The result also refutes the view that the United States can quickly recover through a monetary policy aimed at depreciating the dollar and stands against the idea that devaluation tends to expand domestic output in industrialized countries. Incompatible with the economic logic is the lack of support of the apparent reality of output determination in industrialized countries open economy models.

scholarly journals New Keynesian Liquidity Trap and Conventional Fiscal Stance: An Estimated DSGE Model

2019 ◽  
Vol 33 (1) ◽  
pp. 152-169
Author(s):  
Olatunji Abdul Shobande ◽  
Oladimeji Tomiwa Shodipe
Keyword(s):  
United States ◽  
Monetary Policy ◽  
Fiscal Policy ◽  
The United States ◽  
New Keynesian ◽  
Transmission Channel ◽  
Dsge Model ◽  
Liquidity Trap ◽  
Exogenous Shock ◽  
Macroeconomic Variables

Abstract The study investigates the effect of New Keynesian liquidity trap on fiscal stance in the United States, United Kingdom and Japan economies. We developed our DSGE model in the context of an optimal and persistent interactive fiscal policy, which allows us to track the transmission channel through which shocks are distributed among real economic variables. The evidence suggests that zero lower bound mitigates the ability of monetary policy to absorb the effect of exogenous shock on the macroeconomic variables while expansionary fiscal policy was able to absorb the shock persistence transmitted from the nominal interest rate.

THE SIGNAL EXTRACTION PROBLEM REVISITED: A NOTE ON ITS IMPACT ON A MODEL OF MONETARY POLICY

2009 ◽  
Vol 14 (3) ◽  
pp. 405-426 ◽  
Author(s):  
Benjamin D. Keen
Keyword(s):  
Monetary Policy ◽  
Imperfect Information ◽  
Dynamic Stochastic General Equilibrium ◽  
New Keynesian ◽  
Policy Changes ◽  
Keynesian Model ◽  
Dynamic Stochastic ◽  
Monetary Policy Shock ◽  
Future Policy ◽  
Sticky Wages

This paper develops a dynamic stochastic general equilibrium (DSGE) model with sticky prices and sticky wages, in which agents have imperfect information on the stance and direction of monetary policy. Agents respond by using Kalman filtering to unravel persistent and temporary monetary policy changes in order to form optimal forecasts of future policy actions. Our results show that a New Keynesian model with imperfect information and real rigidities can account for several key effects of an expansionary monetary policy shock: the hump-shaped increase in output, the delayed and gradual rise in inflation, and the fall in the nominal interest rate.

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