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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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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, ESSEC Research Center, ESSEC Business School WP1201, ESSEC Research Center, ESSEC Business School, revised 27 Feb 2012.
  2. Jonathan Benchimol, 2012. "Risk Aversion in the Euro area," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00713669, 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. Crifo, Patricia & Mottis, Nicolas, 2010. "SRI Analysis and Asset Management: Independent or Convergent? A Field Study on the French Market," ESSEC Working Papers, ESSEC Research Center, ESSEC Business School DR 10006, ESSEC Research Center, ESSEC Business School.
  5. Seitz, Franz & Schmidt, Markus A., 2014. "Money in modern macro models: A review of the arguments," OTH im Dialog: Weidener Diskussionspapiere 37, University of Applied Sciences Amberg-Weiden (OTH).
  6. repec:hal:wpaper:hal-00800539 is not listed on IDEAS
  7. Benchimol, Jonathan, 2014. "Risk aversion in the Eurozone," Research in Economics, Elsevier, Elsevier, vol. 68(1), pages 39-56.

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  1. New Keynesian economics in Wikipedia English ne '')
  2. Demand for money in Wikipedia English ne '')
  3. Robert E. Lucas in Wikipedia French ne '')
  4. Monnaie in Wikipedia French ne '')
  5. McCallum rule in Wikipedia English ne '')
  6. André Fourçans in Wikipedia French ne '')
  7. Monetary policy in Wikipedia English ne '')
  8. Пари in Wikipedia Bulgarian ne '')
  9. Taylor rule in Wikipedia English ne '')
  10. Money in Wikipedia English ne '')
  11. Nominal income target in Wikipedia English ne '')
  12. Regla de Taylor in Wikipedia Spanish ne '')

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