In this paper we assess the ability of a cash-in-advance model to replicate the behavior of the macroeconomic variables of the Chilean economy for quarterly data spanning between Q1:1986 and Q1:2000. The monetary models that we studied are able to replicate the phase shift and correlation with GDP of many macroeconomics variables such as consumption, price level and productivity. However, there are some other variables in which the model fails; namely money and capital stock. Introducing an "erratic" monetary growth rate improves the ability of the model to replicate the behavior of consumption. A sensitivity analysis shows that the main determinant of output volatility is the standard deviation of technology shock. Other deep parameters do not have an important quantitative effect on the cyclical behaviour of the macroeconomic variables.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
8274.
Find related papers by JEL classification: E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation
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