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An Estimated Canadian DSGE Model with Nominal and Real Rigidities

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  • Ali Dib
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Abstract

This paper develops a dynamic, stochastic, general-equilibrium (DGSE) model for the Canadian economy and evaluates the real effects of monetary policy shocks. To generate high and persistent real effects, the model combines nominal frictions in the form of costly price adjustment with real rigidities modelled as convex costs of adjusting capital and employment. The structural parameters identifying transmission channels are estimated econometrically using a maximum-likelihood procedure with a Kalman filter. The estimated nominal and real rigidities impart substantial real and persistent effects following a monetary policy shock. Furthermore, the results show that the monetary authority has accommodated technology shocks and has successfully insulated the Canadian economy from demand-side disturbances, by responding to technology and money demand shocks.

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Bibliographic Info

Paper provided by Bank of Canada in its series Working Papers with number 01-26.

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Length: 53 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:bca:bocawp:01-26

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Keywords: Monetary policy framework;

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