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The role of search frictions for output and inflation dynamics: a Bayesian assessment

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  • Martin Menner

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Abstract

Search frictions in the goods market have proven to be a fruitful deviation from the fiction of a centralized Walrasian market providing a micro-foundation of the use of money as a medium of exchange. Moreover, persistent propagation of monetary shocks can arise in search-theoretic monetary models through the interaction of search-frictions in the goods and labor markets, and inventory holdings. Here, a search-theoretic monetary DSGE model with capital and inventory investment is estimated, and its implications on output and inflation dynamics are contrasted with those of standard flexible price monetary models: a cash-in-advance and a portfolio adjustment cost model. Model estimation and comparison is conducted in a Bayesian way in order to account for possible model misspecification. The search model can track inflation and output data better, as well as it dominates the other models in the ability to predict the autocorrelations of inflation and the persistent disinflation process after a technology shock. It generates a hump-shaped but not strong enough output response to a monetary shock. Current and near current correlations between output growth inflation are predicted well.

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Bibliographic Info

Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we076235.

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Date of creation: Sep 2007
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Handle: RePEc:cte:werepe:we076235

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Cited by:
  1. Garcia-Rosa, Alfonso & Kiss, Hubert Janos & Rodriguez-Lara, Ismael, 2010. "Do Social Networks Prevent Bank Runs?," UMUFAE Economics Working Papers, DIGITUM. Universidad de Murcia 9723, DIGITUM. Universidad de Murcia.
  2. Pascal Mossay & Pierre M. Picard, 2009. "On Spatial Equilibria in a Social Interaction Model," CREA Discussion Paper Series 09-02, Center for Research in Economic Analysis, University of Luxembourg.
  3. Elena Márquez & Belén Nieto Doménech & Gonzalo Rubio Irigoyen, 2010. "Consumption, liquidity and the cross-sectional variation of expected returns," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 2010-24, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  4. Ramón Faulí-Oller, 2009. "Mergers of retailers with limited selling capacity," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 2009-26, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  5. Cuberes, David & Dougan, William, 2009. "How Endogenous Is Money? Evidence from a New Microeconomic Estimate," MPRA Paper 17744, University Library of Munich, Germany.
  6. Empar Pons Blasco & Luisa Escriche Bertolín, 2009. "Who moves up the career ladder? A model of gender differences in job promotion," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 2009-23, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  7. Gadea-Blanco, Pedro & Giménez-Gómez, José Manuel & Marco-Gil, María del Carmen, 2013. "Some game-theoretic grounds for meeting people half-way," Working Papers 2072/220217, Universitat Rovira i Virgili, Department of Economics.
  8. José J. Sempere Monerris & Rafael Moner Colonques & Amparo Urbano Salvador, 2010. "Trade liberalization in vertically related markets," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 2010-09, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  9. Sonia Oreffice & Climent Quintana, 2009. "Anthropometry and Socioeconomics in the Couple: Evidence from the PSID," Working Papers 2009-22, FEDEA.
  10. Patricia Cubí Mollá, 2010. "Scaling methods for categorical self-assessed health measures," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 2010-01, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  11. José M. Jiménez Gómez, 2010. "Noncooperative justifications for old bankruptcy rules," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 2010-15, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  12. Francesco Serti & Roberto Leombruni & Tiziano Razzolini, 2010. "The pecuniary and non-pecuniary costs of job displacement. An evaluation of the post-displacement injury rate," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 2010-12, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  13. Aurora Gómez Galvarriato & Cesar Guerrero-Luchtenberg, 2010. "Timing of protectionism," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 2010-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  14. Carolina Silva Cassorla, 2010. "The interaction of minimum wage and severance payments in a frictional labor market: theory and estimation," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 2010-22, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).

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