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Money and Risk Aversion in a DSGE Framework: A Bayesian Application to the Euro Zone

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  • Benchimol, Jonathan

    ()
    (CES, University Paris 1 Panthéon-Sorbonne and Department of Economics, ESSEC Business School)

  • Fourçans, André

    ()
    (ESSEC Business School, Department of Economics)

Abstract

In this paper, we set up and test a model of the Euro zone, with a special emphasis on the role of money. The model follows the New Keynesian DSGE framework, money being introduced in the utility function with a non-separability assumption. By using bayesian estimation techniques, we shed light on the determinants of output and inflation, but also of the interest rate, real money balances, flexible-price output and flexible-price real money balances variances. The role of money is investigated further. We find that its impact on output depends on the degree of agents’ risk aversion, increases with this degree, and becomes significant when risk aversion is high enough. The direct impact of the money variable on inflation variability is essentially minor whatever the risk aversion level, the interest rate (monetary policy) being the overwhelming explanatory factor.

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Bibliographic Info

Paper provided by ESSEC Research Center, ESSEC Business School in its series ESSEC Working Papers with number DR 10005.

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Length: 36 pages
Date of creation: Apr 2010
Date of revision:
Handle: RePEc:ebg:essewp:dr-10005

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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: Bayesian Estimation; DSGE Model; Euro Area; Money;

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Cited by:
  1. Franz Seitz & Markus A. Schmidt, 2014. "Money In Modern Macro Models: A Review of the Arguments," Journal of Reviews on Global Economics, Lifescience Global, vol. 3, pages 156-174.
  2. Jonathan Benchimol & André Fourçans, 2012. "The role of money and monetary policy in crisis periods: the Euro area case," Post-Print hal-00672806, HAL.
  3. Benchimol, Jonathan, 2014. "Risk aversion in the Eurozone," Research in Economics, Elsevier, Elsevier, vol. 68(1), pages 39-56.
  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. Benchimol , Jonathan, 2013. "Money in the Production Function: a new Keynesian DSGE perspective," ESSEC Working Papers, ESSEC Research Center, ESSEC Business School WP1304, ESSEC Research Center, ESSEC Business School.
  6. repec:hal:wpaper:hal-00800539 is not listed on IDEAS
  7. Jonathan Benchimol, 2012. "Risk Aversion in the Euro area," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00713669, HAL.

Lists

This item is featured on the following reading lists or Wikipedia pages:
  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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