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Money and Real Fluctuations: Calibrating a Cash in Advance Model for the Chilean Economy

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Author Info
Acuña, Andrés
Oyarzún, Carlos

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Abstract

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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File URL: http://mpra.ub.uni-muenchen.de/8274/
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 8274.

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Date of creation: Oct 2001
Date of revision: Oct 2005
Handle: RePEc:pra:mprapa:8274

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Related research
Keywords: monetary fluctuations real business cycles general equilibrium

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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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  1. Lucas, Robert Jr. & Stokey, Nancy L., 1983. "Optimal fiscal and monetary policy in an economy without capital," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 55-93. [Downloadable!] (restricted)
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  2. Cooley, Thomas F. & Hansen, Gary D., 1992. "Tax distortions in a neoclassical monetary economy," Journal of Economic Theory, Elsevier, vol. 58(2), pages 290-316, December. [Downloadable!] (restricted)
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  3. Mendoza, Enrique G, 1991. "Real Business Cycles in a Small Open Economy," American Economic Review, American Economic Association, vol. 81(4), pages 797-818, September. [Downloadable!] (restricted)
  4. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November. [Downloadable!] (restricted)
  5. Cooley, Thomas F & Hansen, Gary D, 1989. "The Inflation Tax in a Real Business Cycle Model," American Economic Review, American Economic Association, vol. 79(4), pages 733-48, September. [Downloadable!] (restricted)
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  6. Finn E. Kydland & Edward C. Prescott, 1990. "Business cycles: real facts and a monetary myth," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-18. [Downloadable!]
  7. V. V. Chari & Lawrence J. Christiano & Patrick J. Kehoe, 1991. "Optimal fiscal and monetary policy: some recent results," Staff Report 147, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  8. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November. [Downloadable!] (restricted)
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  9. Bernheim, B Douglas, 1991. "Optimal Fiscal and Monetary Policy: Some Recent Results," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(3), pages 540-42, August. [Downloadable!] (restricted)
  10. Robert E. Lucas, Jr. & Nancy L. Stokey, 1987. "Money and Interest in a Cash-in-Advance Economy," NBER Working Papers 1618, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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