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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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References

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Citations

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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 WP1201, ESSEC Research Center, ESSEC Business School, revised 27 Feb 2012.
  2. repec:hal:wpaper:hal-00800539 is not listed on IDEAS
  3. 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.
  4. repec:hal:cesptp:hal-00800539 is not listed on IDEAS
  5. 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.
  6. 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. Monetary policy in Wikipedia (English)
  2. Monnaie in Wikipedia (French)
  3. Taylor rule in Wikipedia (English)
  4. Regla de Taylor in Wikipedia (Spanish)
  5. McCallum rule in Wikipedia (English)
  6. Robert E. Lucas in Wikipedia (French)
  7. Demand for money in Wikipedia (English)
  8. Nominal income target in Wikipedia (English)
  9. André Fourçans in Wikipedia (French)
  10. Money in Wikipedia (English)
  11. New Keynesian economics in Wikipedia (English)
  12. Пари in Wikipedia (Bulgarian)

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