Endogenous Money or Sticky Wages: A Bayesian Approach
AbstractThis paper attempts to answer question similar to that asked by Ireland (2003): What explains the correlations between nominal and real variables in postwar US data? More precisely, this paper aims to investigate whether endogenous money, sticky wages, or some combination of the two, are necessary features in a dynamic New Keynesian model in explaining the correlations between nominal and real variables in postwar US data. To do so, we estimate a medium-scale dynamic stochastic general equilibrium model of endogenous money. The model is estimated using Bayesian maximum likelihood and compared with a restricted version of the structural model, in which wages are flexible. We conclude that both endogenous money and sticky wages are necessary features in a dynamic New Keynesian model in explaining the variation in key macroeconomic variables, both nominal and real.
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Bibliographic InfoPaper provided by Economic Research Southern Africa in its series Working Papers with number 175.
Length: 25 pages
Date of creation: 2010
Date of revision:
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More information through EDIRC
Endogenous money; Sticky wages; New Keynesian model; Bayesian analysis;
Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-05-15 (All new papers)
- NEP-CBA-2010-05-15 (Central Banking)
- NEP-DGE-2010-05-15 (Dynamic General Equilibrium)
- NEP-MAC-2010-05-15 (Macroeconomics)
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