TFP Persistence and Monetary Policy. NBS, April 27, / 44
|
|
- Osborne Powell
- 6 years ago
- Views:
Transcription
1 TFP Persistence and Monetary Policy Roberto Pancrazi Toulouse School of Economics Marija Vukotić Banque de France NBS, April 27, 2012 NBS, April 27, / 44
2 Motivation 1 Well Known Facts about the Evolution of Macroeconomic Volatility: Evidence 1: Large reduction in the last 30 years [Great Moderation: Kim and Nelson (1999), Stock and Watson (2003)] 2 Our Findings about the Evolution of Macroeconomic Volatility Evidence 2: Uneven decline of the volatility across frequencies Evidence 3: ncreased persistence NBS, April 27, / 44
3 Macroeconomic Variables are Trending Real Per Capita Consumption (US) NBS, April 27, / 44
4 We Need to solate the Trend Real Per Capita Consumption (US) and its Trend NBS, April 27, / 44
5 Motivation Business Cycle Frequencies (2q-32q) component US real per capita Consumption (red-dashed) and Output (blue-solid): 1950:1-2010:4 NBS, April 27, / 44
6 Motivation High-Frequencies (2q-16q) components US real per capita Consumption (red-dashed) and Output (blue-solid): 1950:1-2010:4 Band-Pass lters: Christiano and Fitzgerald NBS, April 27, / 44
7 Motivation Total Factor Productivity What drives the real variables dynamics? A possible candidate is TFP. Stationary component of U.S. TFP with varying capacity utilization (blue-solid) and constant utilization (red-dashed): 1950:1-2010:4 NBS, April 27, / 44
8 Normalized Spectrum of the TFP NBS, April 27, / 44
9 Motivation Equilibrium dynamics of a model: y t = g (x t ; Θ, Φ) x t+1 = h (x t ; Θ, Φ) Θ = structural parameters h i Φ = ϱ Σ laws of motion parameters A change in the autocorrelations structure of an exogenous process has rst-order e ect in the equilibrium: y t ' g Θ, ϱ x t x t+1 ' h Θ, ϱ x t Policy-makers maximize some objective functions to determine their policy, taking into account the equilibrium dynamics. A changed autocorrelation structure modi es the policy functions, thus altering the optimal policy NBS, April 27, / 44
10 n this paper: 1 Provide evidence of a change in the autocorrelation structure of TFP Split Sample, Rolling Windows, Recursive Regressions, TVP-SV Estimates 2 Analyze the analytical relationship between TFP persistence and monetary policy Classical Monetary Model (provide intuition) New-Keynesian Model (workhorse for monetary economics) Medium Scale DSGE Model (numerical methods) 3 Derive the optimal monetary policy as a function of the TFP persistence NBS, April 27, / 44
11 Road-map 1 Provide evidence of a change in the autocorrelation structure of TFP Split sample, Rolling Windows, Recursive Regressions, TVP-SV Estimates 2 Analyze the analytical relationship between TFP persistence and monetary policy Classical Monetary Model (provide intuition) New-Keynesian Model (workhorse for monetary economics) Medium Scale DSGE Model (numerical methods) 3 Characterize the optimal monetary policy as a function of the TFP persistence NBS, April 27, / 44
12 Total Factor Productivity Constructing the data Y t and L t = non-farm business hours and output (BLS). K t = Capital (BLS). U t =capacity utilization manufacturing (FED Board) TFP t = L 1 t Y t α (U t K t ) α Stationary component TFP t follows an autoregressive process: (1 B (L)) TFP t = σ ε ε t ε t iid N (0, 1). NBS, April 27, / 44
13 Split Sample Statistics Split Sample at the early eighties (GM break) Varying utilization 0.74 [0.06] Constant utilization 0.83 [0.05] Sample 1: 1950:1-1982:4 Sample 2: 1983:1-2009:4 Largest Root Std. Dev. nnovations Largest Root Std. Dev. nnovations AR(1) 0.78 [0.05] 1.03 [0.06] 0.95 [0.04] 0.91 [0.04] 0.61 [0.04] 0.63 [0.04] AR(4) Varying utilization Constant utilization spectrum NBS, April 27, / 44
14 Rolling Windows Statistics Assume an AR (1) process for TFP t : compute ˆρ t (blue-solid) and ˆσ ε,t (green-dashed) TFP t TFP t ˆρ t = ˆρ ˆσ j=t k ε,t = ˆσ ε for t = k + 1,..., T j=t k k = 80 NBS, April 27, / 44
15 Recursive Regression Estimates Assume an AR (1) process for TFP t : compute ˆρ RE t TFP ˆρ RE t t = ˆρ for t = k + 1,..., T k NBS, April 27, / 44
16 TVP-SV Model Evidence suggests that ˆρ and ˆσ ε are time-varying: TFP t = ρtfp t 1 + σ ε ε t ε t iid N (0, 1) We formally estimate a Time-Varying-Parameter with Stochastic Volatility: TFP t = ρ t TFP t 1 + ε t ε t N 0, σ 2 t ρ t+1 = ρ t + u t u t N 0, σ 2 u σ 2 t = γ exp (h t ) h t+1 = φh t + η t η t N 0, σ 2 η. Use 1 million repetitions with MCMC methods. NBS, April 27, / 44
17 TVP-SW Model Posterior mean estimate for α t : Posterior mean estimate for σ 2 t : NBS, April 27, / 44
18 Road-map 1 Provide evidence of a change in the autocorrelation structure of TFP Split sample, Rolling Windows, Recursive Regressions, TVP-SV Estimates 2 Analyze the analytical relationship between TFP persistence and monetary policy Classical Monetary Model (provide intuition) New-Keynesian Model (workhorse for monetary economics) Medium Scale DSGE Model (numerical methods) 3 Derive the optimal monetary policy as a function of the TFP-persistence NBS, April 27, / 44
19 Classical Monetary Model (Cooley-Hansen 1989) Money is neutral. Example to illustrate in ation dynamics. Perfect competition, exible prices. Agents trade one-period nominally risk-less bonds Monetary authority sets the nominal interest rate: i t = ρ + φ π π t Fisherian equation: i t = E t π t+1 + r t NBS, April 27, / 44
20 Simple Monetary Model Real interest rate dynamics: Exogenous TFP: Equilibrium in ation dynamics: r t = ρ + σψe t f a t+1 g a t = ρ a a t 1 + σ a ε t ε t iid N (0, 1) π t = φ (k+1) π E t (r t+k ρ), k=0 1 π t = δ a a t δ a = σψ ρ a σ 2 a σ 2 π = δ 2 a (1 ρ 2 a ) φ π ρ a NBS, April 27, / 44
21 n ation Variance and TFP Persistence n ation variance as a function of TFP persistence and monetary policy parameter: NBS, April 27, / 44
22 E ectiveness of Monetary Policy and TFP Persistence E ectiveness of Monetary Policy on the instantaneous response of in ation to a technology shock: δ 1 a = σψ ρ a φ 2. π φ π ρ a NBS, April 27, / 44
23 E ectiveness of Monetary Policy and TFP Persistence Proposition: f we consider a simple monetary model just described, then we can show that the variance of in ation is non-monotone in ρ a and the value of the monetary policy response to in ation φ π that maximizes the variance of in ation in is given by: φ π = 1 + ρ a ρ 2 a NBS, April 27, / 44
24 Road-map 1 Provide evidence of a change in the autocorrelation structure of TFP Split sample, Rolling Windows, Recursive Regressions, TVP-SV Estimates 2 Analyze the analytical relationship between TFP persistence and monetary policy Classical Monetary Model (provide intuition) New-Keynesian Model (workhorse for monetary economics) Medium Scale DSGE Model (numerical methods) 3 Derive the optimal monetary policy as a function of the TFP-persistence NBS, April 27, / 44
25 Standard New-Keynesian Model ntroducing features to obtain non-neutrality of money Staggered price setting and imperfect competition Agents trade one-period nominally risk-less bonds Monetary authority sets the nominal interest rate: i t = ρ + φ π π t + φ y ỹ t + v t Exogenous TFP and monetary shocks a t = ρ a a t 1 + σ a ε a t, where ε a t N (0, 1) v t = ρ v v t 1 + σ v ε v t, where ε v t N (0, 1) NBS, April 27, / 44
26 Equilibrium: rst order approximation Output Gap ỹ t = Λ v φ π, φ y, ρ v, Θ v t + Λ a φ π, φ y, ρ a, Θ (1 βρ Λ v φ π, φ y, ρ v, Θ = v ) (1 βρ v ) σ (1 ρ v ) + φ y + κ (φ π ρ v ) Λ a φ π, φ y, ρ a, Θ = 1 β ρ a σ ψσ 1 ρ a 1 β ρ a 1 ρ a + φ y + κ φ π ρ a a t NBS, April 27, / 44
27 Equilibrium: rst order approximation n ation Λ π v Λ π a π t = Λv π φ π, φ y, ρ v, Θ v t + Λa π φ π, φ y, ρ a, Θ a t κ φ π, φ y, ρ v, Θ = (1 βρ v ) σ (1 ρ v ) + φ y + κ (φ π ρ v ) ψσ 1 ρ a κ φ π, φ y, ρ a, Θ = 1 β ρ a σ 1 ρ a + φ y + κ φ π ρ a NBS, April 27, / 44
28 Standard Calibration: Discount factor:β = 0.99 nverse of intertemporal elast. of substitution: σ = 1 Labor share in the production function: 1 α = 2 3 Elasticity of subs among di erentiated goods: ε = 6 Price stickiness parameter: θ = 2 3 nverse of the Frish elast. of labor supply: ϕ = 1 Monetary response to output gap: φ y = NBS, April 27, / 44
29 Equilibrium: Response of Output Gap to a Technology Shock Monotone relationship between TFP persistence and output gap response to technology (Λ a ) NBS, April 27, / 44
30 Equilibrium: Variance of Output Gap NBS, April 27, / 44
31 ntuition: r n t = ρ + σψe t f a t+1 g = ρ + σψ (1 ρ a ) a t When ρ a! 1, then r n t constant, as well as r t. The output gap in this model results from the current and anticipated deviations of the real interest rate from its natural level: Marginal cost: ỹ t = 1 σ (r t+k rt+k n ) k=0 fmc t ỹ t n ation results from the price-setting decisions by rms that adjust their price considering present and current cost conditions: π t = λ k=0 β k E t f fmc t+k g NBS, April 27, / 44
32 Equilibrium: Response of n ation to a technology shock Non-Monotone relationship between TFP persistence and in ation response to technology (Λ π a ) NBS, April 27, / 44
33 Equilibrium: Variance of n ation NBS, April 27, / 44
34 Proposition: Assume that ρ a 2 ( 1, 1), β < 1, φ y > 0, θ < 1, α < 1, σ > 0, ε > 0, ζ > 0, and φ π > 1. Then and Λ a φ π, φ y, ρ a, Θ > 0 φ π Λ a φ π, φ y, ρ a, Θ > 0 ρ a for any structural parameter vector Θ.Moreover, there exists a value φ π π that maximizes instantaneous response Λa π φ π, φ y, ρ a, Θ. This value is: φ π π = κ + βσ (1 ρ a )2 (1 β) φ y κ for any structural parameter vector Θ NBS, April 27, / 44
35 Road-map 1 Provide evidence of a change in the autocorrelation structure of TFP Split sample, Rolling Windows, Recursive Regressions, TVP-SV Estimates 2 Analyze the analytical relationship between TFP persistence and monetary policy Classical Monetary Model (provide intuition) New-Keynesian Model (workhorse for monetary economics) Medium Scale DSGE Model (numerical methods) 3 Derive the optimal monetary policy as a function of the TFP-persistence NBS, April 27, / 44
36 DSGE Model More features are considered (add capital, real rigidities - habit persistence, investment adjustment cost, variable capacity utilization) Smets and Wouters (2007) Nonlinear relationship among technology persistence, monetary policy response to in ation and variances of output gap and in ation NBS, April 27, / 44
37 DSGE Model Variance of Output Gap and n ation NBS, April 27, / 44
38 Road-map 1 Provide evidence of a change in the autocorrelation structure of TFP Split sample, Rolling Windows, Recursive Regressions, TVP-SV Estimates 2 Analyze the analytical relationship between TFP persistence and monetary policy Classical Monetary Model (provide intuition) New-Keynesian Model (workhorse for monetary economics) Medium Scale DSGE Model (numerical methods) 3 Derive the optimal monetary policy as a function of the TFP-persistence NBS, April 27, / 44
39 Welfare Average Welfare Loss: Rotemberg and Woodford (1999) Second order approximation to the consumer utility loss due to deviations from e cient allocation: AWL = 1 2 σ + ϕ + α var (ỹ t ) + ε 1 α λ var (π t). Calibrated parameters: σ a = 0.45%, σ v = 0.24%, ρ v = The ratio of variance of v t shock and α t shock is kept constant at 3% as estimated by Smets and Wouters (2007) solate the e ect of the increasing persistence by keeping constant the unconditional variance of a t when varying ρ a NBS, April 27, / 44
40 Welfare Average Welfare Loss No Trade-o : respond to in ation arbitrarily strong (devine coincidence) nteresting dynamics driven by ρ a NBS, April 27, / 44
41 Welfare NBS, April 27, / 44
42 Optimal Monetary Policy with Trade-o Without cost-push shocks, the monetary authority does not face trade o between stabilizing output variance and in ation variance and it is optimal to respond to in ation as strongly as possible Add cost-push shocks and then characterize optimal Taylor rule under commitment (φ π, φ y ) by minimizing expected welfare loss: E (WL) = E ( (1 β) t=0 β t h π 2 t + λ y (ỹ t y ) 2 + λ i (i t i ) 2i) Optimal φ π and φ y depend on the persistence of productivity: optimal response is to increase both φ π and φ y as a response to higher persistence of TFP NBS, April 27, / 44
43 Optimal Monetary Policy Parameters as a Function of the Persistence of Technology Higher TFP response calls for a higher response of monetary policy, implying a lower ability of monetary policy to smooth the volatility of macroeconomic variables NBS, April 27, / 44
44 Conclusions Statistical evidences for increasing TFP persistence Analyze the relationship between TFP persistence and monetary policy in the equilibrium dynamics of monetary models Study the e ects of increased TFP persistence on the optimal monetary policy nvestigation of the productivity in the di erent sectors of the economy [Ongoing Research] NBS, April 27, / 44
TFP Persistence and Monetary Policy
TFP Persistence and Monetary Policy Roberto Pancrazi Toulouse School of Economics Marija Vukotić y Banque de France First Draft: September, 2011 PRELIMINARY AND INCOMPLETE Abstract In this paper, by using
More informationECON 4325 Monetary Policy and Business Fluctuations
ECON 4325 Monetary Policy and Business Fluctuations Tommy Sveen Norges Bank January 28, 2009 TS (NB) ECON 4325 January 28, 2009 / 35 Introduction A simple model of a classical monetary economy. Perfect
More informationLecture 23 The New Keynesian Model Labor Flows and Unemployment. Noah Williams
Lecture 23 The New Keynesian Model Labor Flows and Unemployment Noah Williams University of Wisconsin - Madison Economics 312/702 Basic New Keynesian Model of Transmission Can be derived from primitives:
More informationThe Risky Steady State and the Interest Rate Lower Bound
The Risky Steady State and the Interest Rate Lower Bound Timothy Hills Taisuke Nakata Sebastian Schmidt New York University Federal Reserve Board European Central Bank 1 September 2016 1 The views expressed
More informationThe Transmission of Monetary Policy through Redistributions and Durable Purchases
The Transmission of Monetary Policy through Redistributions and Durable Purchases Vincent Sterk and Silvana Tenreyro UCL, LSE September 2015 Sterk and Tenreyro (UCL, LSE) OMO September 2015 1 / 28 The
More informationOn the new Keynesian model
Department of Economics University of Bern April 7, 26 The new Keynesian model is [... ] the closest thing there is to a standard specification... (McCallum). But it has many important limitations. It
More informationMacroeconomic Effects of Financial Shocks: Comment
Macroeconomic Effects of Financial Shocks: Comment Johannes Pfeifer (University of Cologne) 1st Research Conference of the CEPR Network on Macroeconomic Modelling and Model Comparison (MMCN) June 2, 217
More informationFiscal Consolidations in Currency Unions: Spending Cuts Vs. Tax Hikes
Fiscal Consolidations in Currency Unions: Spending Cuts Vs. Tax Hikes Christopher J. Erceg and Jesper Lindé Federal Reserve Board June, 2011 Erceg and Lindé (Federal Reserve Board) Fiscal Consolidations
More informationMacroeconomics. Basic New Keynesian Model. Nicola Viegi. April 29, 2014
Macroeconomics Basic New Keynesian Model Nicola Viegi April 29, 2014 The Problem I Short run E ects of Monetary Policy Shocks I I I persistent e ects on real variables slow adjustment of aggregate price
More informationNot All Oil Price Shocks Are Alike: A Neoclassical Perspective
Not All Oil Price Shocks Are Alike: A Neoclassical Perspective Vipin Arora Pedro Gomis-Porqueras Junsang Lee U.S. EIA Deakin Univ. SKKU December 16, 2013 GRIPS Junsang Lee (SKKU) Oil Price Dynamics in
More informationUnemployment Fluctuations and Nominal GDP Targeting
Unemployment Fluctuations and Nominal GDP Targeting Roberto M. Billi Sveriges Riksbank 3 January 219 Abstract I evaluate the welfare performance of a target for the level of nominal GDP in the context
More informationInflation Dynamics During the Financial Crisis
Inflation Dynamics During the Financial Crisis S. Gilchrist 1 R. Schoenle 2 J. W. Sim 3 E. Zakrajšek 3 1 Boston University and NBER 2 Brandeis University 3 Federal Reserve Board Theory and Methods in Macroeconomics
More informationMoney and monetary policy in Israel during the last decade
Money and monetary policy in Israel during the last decade Money Macro and Finance Research Group 47 th Annual Conference Jonathan Benchimol 1 This presentation does not necessarily reflect the views of
More informationBooms and Busts in Asset Prices. May 2010
Booms and Busts in Asset Prices Klaus Adam Mannheim University & CEPR Albert Marcet London School of Economics & CEPR May 2010 Adam & Marcet ( Mannheim Booms University and Busts & CEPR London School of
More informationLecture 2, November 16: A Classical Model (Galí, Chapter 2)
MakØk3, Fall 2010 (blok 2) Business cycles and monetary stabilization policies Henrik Jensen Department of Economics University of Copenhagen Lecture 2, November 16: A Classical Model (Galí, Chapter 2)
More informationComment. The New Keynesian Model and Excess Inflation Volatility
Comment Martín Uribe, Columbia University and NBER This paper represents the latest installment in a highly influential series of papers in which Paul Beaudry and Franck Portier shed light on the empirics
More informationOptimal monetary policy when asset markets are incomplete
Optimal monetary policy when asset markets are incomplete R. Anton Braun Tomoyuki Nakajima 2 University of Tokyo, and CREI 2 Kyoto University, and RIETI December 9, 28 Outline Introduction 2 Model Individuals
More informationTOPICS IN MACROECONOMICS: MODELLING INFORMATION, LEARNING AND EXPECTATIONS LECTURE NOTES. Lucas Island Model
TOPICS IN MACROECONOMICS: MODELLING INFORMATION, LEARNING AND EXPECTATIONS LECTURE NOTES KRISTOFFER P. NIMARK Lucas Island Model The Lucas Island model appeared in a series of papers in the early 970s
More informationState-Dependent Pricing and the Paradox of Flexibility
State-Dependent Pricing and the Paradox of Flexibility Luca Dedola and Anton Nakov ECB and CEPR May 24 Dedola and Nakov (ECB and CEPR) SDP and the Paradox of Flexibility 5/4 / 28 Policy rates in major
More informationOutput Gaps and Robust Monetary Policy Rules
Output Gaps and Robust Monetary Policy Rules Roberto M. Billi Sveriges Riksbank Conference on Monetary Policy Challenges from a Small Country Perspective, National Bank of Slovakia Bratislava, 23-24 November
More informationMoney and monetary policy in the Eurozone: an empirical analysis during crises
Money and monetary policy in the Eurozone: an empirical analysis during crises Money Macro and Finance Research Group 46 th Annual Conference Jonathan Benchimol 1 and André Fourçans 2 This presentation
More informationHabit Formation in State-Dependent Pricing Models: Implications for the Dynamics of Output and Prices
Habit Formation in State-Dependent Pricing Models: Implications for the Dynamics of Output and Prices Phuong V. Ngo,a a Department of Economics, Cleveland State University, 22 Euclid Avenue, Cleveland,
More informationFiscal Policy in an Estimated DSGE Model of the Japanese Economy
Fiscal Policy in an Estimated DSGE Model of the Japanese Economy Do Non-Ricardian Households Explain All? Yasuharu Iwata Economic and Social Research Institute, Cabinet O ce, Government of Japan June 2009
More informationCredit Frictions and Optimal Monetary Policy
Vasco Cúrdia FRB of New York 1 Michael Woodford Columbia University National Bank of Belgium, October 28 1 The views expressed in this paper are those of the author and do not necessarily re ect the position
More informationConvergence of Life Expectancy and Living Standards in the World
Convergence of Life Expectancy and Living Standards in the World Kenichi Ueda* *The University of Tokyo PRI-ADBI Joint Workshop January 13, 2017 The views are those of the author and should not be attributed
More informationAppendix: Model and Experiments
Appendix: Model and Experiments 1. Model A. Model solution under rational expectations Denoting π e t = E t π t+1, x e t = E t x t+1, we can write the rational expectations solution of the equilibrium
More informationAsymmetric Labor Market Institutions in the EMU and the Volatility of In ation and Unemployment Di erentials
Asymmetric Labor Market nstitutions in the EMU and the Volatility of n ation and Unemployment Di erentials Mirko Abbritti (Universidad de Navarra) Andreas Mueller (Columbia Business School) DNB/MF Workshop
More informationMonetary Economics Final Exam
316-466 Monetary Economics Final Exam 1. Flexible-price monetary economics (90 marks). Consider a stochastic flexibleprice money in the utility function model. Time is discrete and denoted t =0, 1,...
More informationDual Wage Rigidities: Theory and Some Evidence
MPRA Munich Personal RePEc Archive Dual Wage Rigidities: Theory and Some Evidence Insu Kim University of California, Riverside October 29 Online at http://mpra.ub.uni-muenchen.de/18345/ MPRA Paper No.
More informationCommodity price shocks and impefectly credible macroeconomic policies
Commodity price shocks and impefectly credible macroeconomic policies Juan Pablo Medina (IMF) Claudio Soto (Central Bank of Chile) November 2012 uan Pablo Medina (IMF), Claudio Soto (Central Commodity
More informationThe science of monetary policy
Macroeconomic dynamics PhD School of Economics, Lectures 2018/19 The science of monetary policy Giovanni Di Bartolomeo giovanni.dibartolomeo@uniroma1.it Doctoral School of Economics Sapienza University
More informationStock Price, Risk-free Rate and Learning
Stock Price, Risk-free Rate and Learning Tongbin Zhang Univeristat Autonoma de Barcelona and Barcelona GSE April 2016 Tongbin Zhang (Institute) Stock Price, Risk-free Rate and Learning April 2016 1 / 31
More informationLearning and Time-Varying Macroeconomic Volatility
Learning and Time-Varying Macroeconomic Volatility Fabio Milani University of California, Irvine International Research Forum, ECB - June 26, 28 Introduction Strong evidence of changes in macro volatility
More informationCountry Spreads as Credit Constraints in Emerging Economy Business Cycles
Conférence organisée par la Chaire des Amériques et le Centre d Economie de la Sorbonne, Université Paris I Country Spreads as Credit Constraints in Emerging Economy Business Cycles Sarquis J. B. Sarquis
More informationSupply-side effects of monetary policy and the central bank s objective function. Eurilton Araújo
Supply-side effects of monetary policy and the central bank s objective function Eurilton Araújo Insper Working Paper WPE: 23/2008 Copyright Insper. Todos os direitos reservados. É proibida a reprodução
More informationEconomic stability through narrow measures of inflation
Economic stability through narrow measures of inflation Andrew Keinsley Weber State University Version 5.02 May 1, 2017 Abstract Under the assumption that different measures of inflation draw on the same
More informationThe New Keynesian Approach to Monetary Policy Analysis: Lessons and New Directions
The to Monetary Policy Analysis: Lessons and New Directions Jordi Galí CREI and U. Pompeu Fabra ice of Monetary Policy Today" October 4, 2007 The New Keynesian Paradigm: Key Elements Dynamic stochastic
More informationA Macroeconomic Model with Financial Panics
A Macroeconomic Model with Financial Panics Mark Gertler, Nobuhiro Kiyotaki, Andrea Prestipino NYU, Princeton, Federal Reserve Board 1 March 218 1 The views expressed in this paper are those of the authors
More informationIntroduction to DSGE Models
Introduction to DSGE Models Luca Brugnolini January 2015 Luca Brugnolini Introduction to DSGE Models January 2015 1 / 23 Introduction to DSGE Models Program DSGE Introductory course (6h) Object: deriving
More informationMonetary Policy and Stock Market Boom-Bust Cycles by L. Christiano, C. Ilut, R. Motto, and M. Rostagno
Comments on Monetary Policy and Stock Market Boom-Bust Cycles by L. Christiano, C. Ilut, R. Motto, and M. Rostagno Andrew Levin Federal Reserve Board May 8 The views expressed are solely the responsibility
More informationMonetary Policy in a New Keyneisan Model Walsh Chapter 8 (cont)
Monetary Policy in a New Keyneisan Model Walsh Chapter 8 (cont) 1 New Keynesian Model Demand is an Euler equation x t = E t x t+1 ( ) 1 σ (i t E t π t+1 ) + u t Supply is New Keynesian Phillips Curve π
More informationThe new Kenesian model
The new Kenesian model Michaª Brzoza-Brzezina Warsaw School of Economics 1 / 4 Flexible vs. sticky prices Central assumption in the (neo)classical economics: Prices (of goods and factor services) are fully
More informationExercises on the New-Keynesian Model
Advanced Macroeconomics II Professor Lorenza Rossi/Jordi Gali T.A. Daniël van Schoot, daniel.vanschoot@upf.edu Exercises on the New-Keynesian Model Schedule: 28th of May (seminar 4): Exercises 1, 2 and
More informationInflation in the Great Recession and New Keynesian Models
Inflation in the Great Recession and New Keynesian Models Marco Del Negro, Marc Giannoni Federal Reserve Bank of New York Frank Schorfheide University of Pennsylvania BU / FRB of Boston Conference on Macro-Finance
More informationMoney, Sticky Wages, and the Great Depression
Money, Sticky Wages, and the Great Depression American Economic Review, 2000 Michael D. Bordo 1 Christopher J. Erceg 2 Charles L. Evans 3 1. Rutgers University, Department of Economics 2. Federal Reserve
More informationFinancial intermediaries in an estimated DSGE model for the UK
Financial intermediaries in an estimated DSGE model for the UK Stefania Villa a Jing Yang b a Birkbeck College b Bank of England Cambridge Conference - New Instruments of Monetary Policy: The Challenges
More informationUnemployment Persistence, Inflation and Monetary Policy in A Dynamic Stochastic Model of the Phillips Curve
Unemployment Persistence, Inflation and Monetary Policy in A Dynamic Stochastic Model of the Phillips Curve by George Alogoskoufis* March 2016 Abstract This paper puts forward an alternative new Keynesian
More informationState-Dependent Fiscal Multipliers: Calvo vs. Rotemberg *
State-Dependent Fiscal Multipliers: Calvo vs. Rotemberg * Eric Sims University of Notre Dame & NBER Jonathan Wolff Miami University May 31, 2017 Abstract This paper studies the properties of the fiscal
More informationThe Costs of Losing Monetary Independence: The Case of Mexico
The Costs of Losing Monetary Independence: The Case of Mexico Thomas F. Cooley New York University Vincenzo Quadrini Duke University and CEPR May 2, 2000 Abstract This paper develops a two-country monetary
More informationFiscal and Monetary Policy in a New Keynesian Model with Tobin s Q Investment Theory Features
MPRA Munich Personal RePEc Archive Fiscal and Monetary Policy in a New Keynesian Model with Tobin s Q Investment Theory Features Stylianos Giannoulakis Athens University of Economics and Business 4 May
More informationSchäuble versus Tsipras: a New-Keynesian DSGE Model with Sovereign Default for the Eurozone Debt Crisis
Schäuble versus Tsipras: a New-Keynesian DSGE Model with Sovereign Default for the Eurozone Debt Crisis Mathilde Viennot 1 (Paris School of Economics) 1 Co-authored with Daniel Cohen (PSE, CEPR) and Sébastien
More informationExtended DSGE Model of the Czech Economy
Zbyněk Štork Božena Bobková Ilkin Aliyev Moderní nástroje pro finanční analýzu a modelování 5. 6. 214 Outline 1 Extended DSGE model 2 3 Simulation 4 Outline 1 Extended DSGE model 2 3 Simulation 4 Outline
More informationOn the Merits of Conventional vs Unconventional Fiscal Policy
On the Merits of Conventional vs Unconventional Fiscal Policy Matthieu Lemoine and Jesper Lindé Banque de France and Sveriges Riksbank The views expressed in this paper do not necessarily reflect those
More informationVolatility Risk Pass-Through
Volatility Risk Pass-Through Ric Colacito Max Croce Yang Liu Ivan Shaliastovich 1 / 18 Main Question Uncertainty in a one-country setting: Sizeable impact of volatility risks on growth and asset prices
More informationKeynesian Views On The Fiscal Multiplier
Faculty of Social Sciences Jeppe Druedahl (Ph.d. Student) Department of Economics 16th of December 2013 Slide 1/29 Outline 1 2 3 4 5 16th of December 2013 Slide 2/29 The For Today 1 Some 2 A Benchmark
More informationIdiosyncratic risk, insurance, and aggregate consumption dynamics: a likelihood perspective
Idiosyncratic risk, insurance, and aggregate consumption dynamics: a likelihood perspective Alisdair McKay Boston University June 2013 Microeconomic evidence on insurance - Consumption responds to idiosyncratic
More informationEstimating Output Gap in the Czech Republic: DSGE Approach
Estimating Output Gap in the Czech Republic: DSGE Approach Pavel Herber 1 and Daniel Němec 2 1 Masaryk University, Faculty of Economics and Administrations Department of Economics Lipová 41a, 602 00 Brno,
More informationTechnology shocks and Monetary Policy: Assessing the Fed s performance
Technology shocks and Monetary Policy: Assessing the Fed s performance (J.Gali et al., JME 2003) Miguel Angel Alcobendas, Laura Desplans, Dong Hee Joe March 5, 2010 M.A.Alcobendas, L. Desplans, D.H.Joe
More informationInflation Dynamics During the Financial Crisis
Inflation Dynamics During the Financial Crisis S. Gilchrist 1 1 Boston University and NBER MFM Summer Camp June 12, 2016 DISCLAIMER: The views expressed are solely the responsibility of the authors and
More informationOil and macroeconomic (in)stability
Oil and macroeconomic (in)stability Hilde C. Bjørnland Vegard H. Larsen Centre for Applied Macro- and Petroleum Economics (CAMP) BI Norwegian Business School CFE-ERCIM December 07, 2014 Bjørnland and Larsen
More informationThe Eurozone Debt Crisis: A New-Keynesian DSGE model with default risk
The Eurozone Debt Crisis: A New-Keynesian DSGE model with default risk Daniel Cohen 1,2 Mathilde Viennot 1 Sébastien Villemot 3 1 Paris School of Economics 2 CEPR 3 OFCE Sciences Po PANORisk workshop 7
More informationA Threshold Multivariate Model to Explain Fiscal Multipliers with Government Debt
Econometric Research in Finance Vol. 4 27 A Threshold Multivariate Model to Explain Fiscal Multipliers with Government Debt Leonardo Augusto Tariffi University of Barcelona, Department of Economics Submitted:
More informationOptimality of Inflation and Nominal Output Targeting
Optimality of Inflation and Nominal Output Targeting Julio Garín Department of Economics University of Georgia Robert Lester Department of Economics University of Notre Dame First Draft: January 7, 15
More informationHeterogeneous Firm, Financial Market Integration and International Risk Sharing
Heterogeneous Firm, Financial Market Integration and International Risk Sharing Ming-Jen Chang, Shikuan Chen and Yen-Chen Wu National DongHwa University Thursday 22 nd November 2018 Department of Economics,
More informationThe Basic New Keynesian Model
Jordi Gali Monetary Policy, inflation, and the business cycle Lian Allub 15/12/2009 In The Classical Monetary economy we have perfect competition and fully flexible prices in all markets. Here there is
More informationSamba: Stochastic Analytical Model with a Bayesian Approach. DSGE Model Project for Brazil s economy
Samba: Stochastic Analytical Model with a Bayesian Approach DSGE Model Project for Brazil s economy Working in Progress - Preliminary results Solange Gouvea, André Minella, Rafael Santos, Nelson Souza-Sobrinho
More informationCountry Spreads and Emerging Countries: Who Drives Whom? Martin Uribe and Vivian Yue (JIE, 2006)
Country Spreads and Emerging Countries: Who Drives Whom? Martin Uribe and Vivian Yue (JIE, 26) Country Interest Rates and Output in Seven Emerging Countries Argentina Brazil.5.5...5.5.5. 94 95 96 97 98
More informationEndogenous Money or Sticky Wages: A Bayesian Approach
Endogenous Money or Sticky Wages: A Bayesian Approach Guangling Dave Liu 1 Working Paper Number 17 1 Contact Details: Department of Economics, University of Stellenbosch, Stellenbosch, 762, South Africa.
More informationExamining the Bond Premium Puzzle in a DSGE Model
Examining the Bond Premium Puzzle in a DSGE Model Glenn D. Rudebusch Eric T. Swanson Economic Research Federal Reserve Bank of San Francisco John Taylor s Contributions to Monetary Theory and Policy Federal
More informationThe Long-run Optimal Degree of Indexation in the New Keynesian Model
The Long-run Optimal Degree of Indexation in the New Keynesian Model Guido Ascari University of Pavia Nicola Branzoli University of Pavia October 27, 2006 Abstract This note shows that full price indexation
More informationAdvanced Topics in Monetary Economics II 1
Advanced Topics in Monetary Economics II 1 Carl E. Walsh UC Santa Cruz August 18-22, 2014 1 c Carl E. Walsh, 2014. Carl E. Walsh (UC Santa Cruz) Gerzensee Study Center August 18-22, 2014 1 / 38 Uncertainty
More informationA Small Open Economy DSGE Model for an Oil Exporting Emerging Economy
A Small Open Economy DSGE Model for an Oil Exporting Emerging Economy Iklaga, Fred Ogli University of Surrey f.iklaga@surrey.ac.uk Presented at the 33rd USAEE/IAEE North American Conference, October 25-28,
More informationSentiments and Aggregate Fluctuations
Sentiments and Aggregate Fluctuations Jess Benhabib Pengfei Wang Yi Wen June 15, 2012 Jess Benhabib Pengfei Wang Yi Wen () Sentiments and Aggregate Fluctuations June 15, 2012 1 / 59 Introduction We construct
More informationSelf-fulfilling Recessions at the ZLB
Self-fulfilling Recessions at the ZLB Charles Brendon (Cambridge) Matthias Paustian (Board of Governors) Tony Yates (Birmingham) August 2016 Introduction This paper is about recession dynamics at the ZLB
More informationDiscussion of Lumpy investment in general equilibrium by Bachman, Caballero, and Engel
Discussion of Lumpy investment in general equilibrium by Bachman, Caballero, and Engel Julia K. Thomas Federal Reserve Bank of Philadelphia 9 February 2007 Julia Thomas () Discussion of Bachman, Caballero,
More informationMacroeconomics 2. Lecture 6 - New Keynesian Business Cycles March. Sciences Po
Macroeconomics 2 Lecture 6 - New Keynesian Business Cycles 2. Zsófia L. Bárány Sciences Po 2014 March Main idea: introduce nominal rigidities Why? in classical monetary models the price level ensures money
More informationFiscal Consolidation in a Currency Union: Spending Cuts Vs. Tax Hikes
Fiscal Consolidation in a Currency Union: Spending Cuts Vs. Tax Hikes Christopher J. Erceg and Jesper Lindé Federal Reserve Board October, 2012 Erceg and Lindé (Federal Reserve Board) Fiscal Consolidations
More informationEffi cient monetary policy frontier for Iceland
Effi cient monetary policy frontier for Iceland A report to taskforce on reviewing Iceland s monetary and currency policies Marías Halldór Gestsson May 2018 1 Introduction A central bank conducting monetary
More informationChasing the Gap: Speed Limits and Optimal Monetary Policy
Chasing the Gap: Speed Limits and Optimal Monetary Policy Matteo De Tina University of Bath Chris Martin University of Bath January 2014 Abstract Speed limit monetary policy rules incorporate a response
More informationECON 815. A Basic New Keynesian Model II
ECON 815 A Basic New Keynesian Model II Winter 2015 Queen s University ECON 815 1 Unemployment vs. Inflation 12 10 Unemployment 8 6 4 2 0 1 1.5 2 2.5 3 3.5 4 4.5 5 Core Inflation 14 12 10 Unemployment
More informationUncertainty Shocks In A Model Of Effective Demand
Uncertainty Shocks In A Model Of Effective Demand Susanto Basu Boston College NBER Brent Bundick Boston College Preliminary Can Higher Uncertainty Reduce Overall Economic Activity? Many think it is an
More informationBank Capital Requirements: A Quantitative Analysis
Bank Capital Requirements: A Quantitative Analysis Thiên T. Nguyễn Introduction Motivation Motivation Key regulatory reform: Bank capital requirements 1 Introduction Motivation Motivation Key regulatory
More informationOil Price Uncertainty in a Small Open Economy
Yusuf Soner Başkaya Timur Hülagü Hande Küçük 6 April 212 Oil price volatility is high and it varies over time... 15 1 5 1985 199 1995 2 25 21 (a) Mean.4.35.3.25.2.15.1.5 1985 199 1995 2 25 21 (b) Coefficient
More informationBenjamin D. Keen. University of Oklahoma. Alexander W. Richter. Federal Reserve Bank of Dallas. Nathaniel A. Throckmorton. College of William & Mary
FORWARD GUIDANCE AND THE STATE OF THE ECONOMY Benjamin D. Keen University of Oklahoma Alexander W. Richter Federal Reserve Bank of Dallas Nathaniel A. Throckmorton College of William & Mary The views expressed
More informationEndogenous Markups in the New Keynesian Model: Implications for In ation-output Trade-O and Optimal Policy
Endogenous Markups in the New Keynesian Model: Implications for In ation-output Trade-O and Optimal Policy Ozan Eksi TOBB University of Economics and Technology November 2 Abstract The standard new Keynesian
More informationLorant Kaszab (MNB) Roman Horvath (IES)
Aleš Maršál (NBS) Lorant Kaszab (MNB) Roman Horvath (IES) Modern Tools for Financial Analysis and ing - Matlab 4.6.2015 Outline Calibration output stabilization spending reversals Table : Impact of QE
More informationA Macroeconomic Model with Financial Panics
A Macroeconomic Model with Financial Panics Mark Gertler, Nobuhiro Kiyotaki, Andrea Prestipino NYU, Princeton, Federal Reserve Board 1 September 218 1 The views expressed in this paper are those of the
More information1 Dynamic programming
1 Dynamic programming A country has just discovered a natural resource which yields an income per period R measured in terms of traded goods. The cost of exploitation is negligible. The government wants
More informationThe design of the funding scheme of social security systems and its role in macroeconomic stabilization
The design of the funding scheme of social security systems and its role in macroeconomic stabilization Simon Voigts (work in progress) SFB 649 Motzen conference 214 Overview 1 Motivation and results 2
More informationRegime Switching, Learning, and the Great Moderation
CAEPR Working Paper #2008-011 Regime Switching, Learning, and the Great Moderation James Murray Indiana University Bloomington April 30, 2008 This paper can be downloaded without charge from the Social
More informationMonetary Policy Implications of State-Dependent Prices and Wages
Monetary Policy Implications of State-Dependent Prices and Wages James Costain, Anton Nakov, Borja Petit Bank of Spain, ECB and CEPR, CEMFI The views expressed here are personal and do not necessarily
More informationSDP Macroeconomics Final exam, 2014 Professor Ricardo Reis
SDP Macroeconomics Final exam, 2014 Professor Ricardo Reis Answer each question in three or four sentences and perhaps one equation or graph. Remember that the explanation determines the grade. 1. Question
More informationOptimal Monetary Policy
Optimal Monetary Policy Graduate Macro II, Spring 200 The University of Notre Dame Professor Sims Here I consider how a welfare-maximizing central bank can and should implement monetary policy in the standard
More informationFrequency of Price Adjustment and Pass-through
Frequency of Price Adjustment and Pass-through Gita Gopinath Harvard and NBER Oleg Itskhoki Harvard CEFIR/NES March 11, 2009 1 / 39 Motivation Micro-level studies document significant heterogeneity in
More informationFiscal Multipliers in Recessions. M. Canzoneri, F. Collard, H. Dellas and B. Diba
1 / 52 Fiscal Multipliers in Recessions M. Canzoneri, F. Collard, H. Dellas and B. Diba 2 / 52 Policy Practice Motivation Standard policy practice: Fiscal expansions during recessions as a means of stimulating
More informationThe Real Business Cycle Model
The Real Business Cycle Model Economics 3307 - Intermediate Macroeconomics Aaron Hedlund Baylor University Fall 2013 Econ 3307 (Baylor University) The Real Business Cycle Model Fall 2013 1 / 23 Business
More informationGHG Emissions Control and Monetary Policy
GHG Emissions Control and Monetary Policy Barbara Annicchiarico* Fabio Di Dio** *Department of Economics and Finance University of Rome Tor Vergata **IT Economia - SOGEI S.P.A Workshop on Central Banking,
More informationCheers to the Good Health of the US Short-Run Phillips Curve
Cheers to the Good Health of the US Short-Run Phillips Curve Michal Andrle 1 University of Notre Dame, May 1 1 The views expressed herein are those of the author and should not be attributed to the International
More informationSharing the Burden: Monetary and Fiscal Responses to a World Liquidity Trap David Cook and Michael B. Devereux
Sharing the Burden: Monetary and Fiscal Responses to a World Liquidity Trap David Cook and Michael B. Devereux Online Appendix: Non-cooperative Loss Function Section 7 of the text reports the results for
More informationEXAMINING MACROECONOMIC MODELS
1 / 24 EXAMINING MACROECONOMIC MODELS WITH FINANCE CONSTRAINTS THROUGH THE LENS OF ASSET PRICING Lars Peter Hansen Benheim Lectures, Princeton University EXAMINING MACROECONOMIC MODELS WITH FINANCING CONSTRAINTS
More information