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Money and risk in a DSGE framework: A Bayesian application to the Eurozone

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  • Benchimol, Jonathan
  • Fourçans, André

Abstract

We present and test a model of the Eurozone, with a special emphasis on the role of risk aversion and money. The model follows the New Keynesian DSGE framework, money being introduced in the utility function with a non-separability assumption. Money is also introduced in the Taylor rule. By using Bayesian estimation techniques, we shed light on the determinants of output, inflation, money, interest rate, flexible-price output, and flexible-price real money balance dynamics. The role of money is investigated further. Its impact on output depends on the degree of risk aversion. Money plays a minor role in the estimated model. Yet, a higher level of risk aversion would imply that money had significant quantitative effects on business cycle fluctuations.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 34 (2012)
Issue (Month): 1 ()
Pages: 95-111

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Handle: RePEc:eee:jmacro:v:34:y:2012:i:1:p:95-111

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Web page: http://www.elsevier.com/locate/inca/622617

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Keywords: Euro area; Money; Risk; Bayesian estimation; DSGE;

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Citations

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Cited by:
  1. Benchimol, Jonathan & Fourçans, André, 2012. "The role of money and monetary policy in crisis periods: the Euro area case," ESSEC Working Papers WP1201, ESSEC Research Center, ESSEC Business School, revised 27 Feb 2012.
  2. Benchimol , Jonathan, 2013. "Money in the Production Function: a new Keynesian DSGE perspective," ESSEC Working Papers WP1304, ESSEC Research Center, ESSEC Business School.
  3. Benchimol, Jonathan, 2014. "Risk aversion in the Eurozone," Research in Economics, Elsevier, vol. 68(1), pages 39-56.
  4. repec:hal:cesptp:hal-00800539 is not listed on IDEAS
  5. Jonathan Benchimol, 2012. "Risk Aversion in the Euro area," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00713669, HAL.
  6. Patricia Crifo & Nicolas Mottis, 2010. "SRI analysis and asset management : independent or convergent ? : A field study on the French market," Post-Print hal-00572379, HAL.
  7. repec:hal:wpaper:hal-00800539 is not listed on IDEAS

Lists

This item is featured on the following reading lists or Wikipedia pages:
  1. New Keynesian economics in Wikipedia English ne '')
  2. Monetary policy in Wikipedia English ne '')
  3. Money in Wikipedia English ne '')
  4. Robert E. Lucas in Wikipedia French ne '')
  5. Nominal income target in Wikipedia English ne '')
  6. McCallum rule in Wikipedia English ne '')
  7. Пари in Wikipedia Bulgarian ne '')
  8. Monnaie in Wikipedia French ne '')
  9. Taylor rule in Wikipedia English ne '')
  10. André Fourçans in Wikipedia French ne '')
  11. Regla de Taylor in Wikipedia Spanish ne '')
  12. Demand for money in Wikipedia English ne '')

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