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Money in a DSGE framework with an application to the Euro Zone

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Abstract

In the current New Keynesian literature, the role of monetary aggregates is generally neglected. Yet it’s hard to imagine money completely “passive” to the rest of the system. By entering real money balances in a non-separable utility function, we introduce an explicit role for money via preference redefinition in a simple New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model. It involves new inflation and output gap specifications where money plays a significant role. We use the General Method of Moments (GMM) to calibrate our DSGE model of the Euro area and we show that the European Central Bank –ECB) should react more strongly to economic shocks as far as the role of money is found significant.

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Bibliographic Info

Paper provided by ESSEC Research Center, ESSEC Business School in its series ESSEC Working Papers with number DR 09005.

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Length: 26 pages
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:ebg:essewp:dr-09005

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Postal: ESSEC Research Center, BP 105, 95021 Cergy, France
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Web page: http://www.essec.edu/
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Keywords: ECB; Inflation; Monetary Policy; Money;

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Citations

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Cited by:
  1. Jonathan Benchimol, 2012. "Risk Aversion in the Euro area," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00713669, HAL.
  2. Jonathan Benchimol, 2011. "Money in the production function: a New Keynesian DSGE perspective," Working Papers hal-00800539, HAL.
  3. Jonathan Benchimol, 2013. "Money in the Production Function : A New Keynesian DSGE Perspective," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00795547, HAL.
  4. 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.
  5. Jonathan Benchimol & André Fourçans, 2012. "The role of money and monetary policy in crisis periods: the Euro area case," Post-Print hal-00672806, HAL.

Lists

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