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Monetary policy in the New-Keynesian model: An application to the Euro-Area

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Author Info
Moons C.
Garretsen H.
Van Aarle B.
Fornero J.

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Abstract

This paper analyses monetary policy in a stylized new-Keynesian model. A number of issues are focused upon: (i) optimal monetary policy under commitment or discretion vs. ad-hoc monetary policy based on simple rules, (ii) the effects of fiscal policies and foreign variables on monetary policy, (iii) the effects of fiscal deficit and interest rate smoothing objectives and the amount of forward-looking in the model. The model is estimated for the Euro-Area. Using simulations of the estimated model, it is analyzed how these aspects might affect monetary policy of the ECB and macro-economic fluctuations in the Euro-Area.

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Paper provided by University of Antwerp, Faculty of Applied Economics in its series Working Papers with number 2007014.

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Length: 25 pages
Date of creation: Jun 2007
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Handle: RePEc:ant:wpaper:2007014

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  21. Miguel Casares, 2004. "On monetary policy rules for the euro area," Banco de España Working Papers 0415, Banco de España. [Downloadable!]
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  30. Campbell Leith & Jim Malley, 2002. "Estimated General Equilibrium Models for the Evaluation of Monetary Policy in the US and Europe," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  31. Robert Anderton, 2003. "Extra-euro area manufacturing import prices and exchange rate pass-through," Working Paper Series 219, European Central Bank. [Downloadable!]
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Cited by:
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  1. Pierre-Richard Agénor & Nihal Bayraktar, 2008. "Contracting Models of the Phillips Curve Empirical Estimates for Middle-Income Countries," Centre for Growth and Business Cycle Research Discussion Paper Series 94, Economics, The Univeristy of Manchester. [Downloadable!]
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