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Euler equations and monetary policy

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  • Collard, Fabrice
  • Dellas, Harris

Abstract

Euler equations are the key link between monetary policy and the real economy in NK models. Under separable preferences, they fail to match interest rates. Non-separability between leisure and consumption significantly improves their fit and reliability for studying monetary policy.

Suggested Citation

  • Collard, Fabrice & Dellas, Harris, 2012. "Euler equations and monetary policy," Economics Letters, Elsevier, vol. 114(1), pages 1-5.
    • Handle: RePEc:eee:ecolet:v:114:y:2012:i:1:p:1-5
    DOI: 10.1016/j.econlet.2011.09.009
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    References listed on IDEAS

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    Cited by:

    1. Gareis, Johannes & Mayer, Eric, 2013. "Euler equations and money market interest rates: The role of monetary policy and risk premium shocks," Economics Letters, Elsevier, vol. 120(1), pages 27-31.
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    3. Bechlioulis, Alexandros P. & Brissimis, Sophocles N., 2021. "Identifying key aspects of household behavior in a representative agent framework," Economic Modelling, Elsevier, vol. 97(C), pages 105-117.
    4. Brissimis, Sophocles N. & Bechlioulis, Alexandros P., 2017. "The link between consumption and leisure under Cobb-Douglas preferences:Some new evidence," MPRA Paper 80877, University Library of Munich, Germany.

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    More about this item

    Keywords

    Euler interest rate; Non-separable utility; Monetary policy;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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