Persistency and Money Demand Distortions in a Stochastic DGE Model with Sticky Prices and Capital
AbstractThis paper considers the implications of adding capital as a factor of production in a stochastic DGE model with sticky prices. Particular attention is given to the role of money demand and to the form of the utility function. I consider cash-in-advance- (CIA) as well as money-in-the-utility-function- (MIU) models, with CRRA and GHH preferences, to evaluate their ability to generate persistence. It is shown that even in a MIU-model with a GHH utility function and a high elasticity of labor supply with respect to the real wage the additional intertemporal substitution channel opened through capital accumulation does have a significant dampening influence on the persistence effects of monetary shocks. In a CIA-setup with GHH preferences the model can generate the liquidity effect. A multiplicatively separable CRRA utility function in the MIU-model cannot account for the observed persistent reactions of inflation and output either.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoPaper provided by Society for Computational Economics in its series Computing in Economics and Finance 2002 with number 302.
Date of creation: 01 Jul 2002
Date of revision:
Monetary Policy; New Neoclassical Synthesis; Sticky Prices; Persistency; Real Business Cycle;
Other versions of this item:
- Michael Gail, 2002. "Persistency and Money Demand Distortions in a Stochastic DGE Model with Sticky Prices and Capital," Volkswirtschaftliche DiskussionsbeitrÃ¤ge 103-02, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht, revised 05 May 2003.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dixit, Avinash K & Stiglitz, Joseph E, 1975.
"Monopolistic Competition and Optimum Product Diversity,"
The Warwick Economics Research Paper Series (TWERPS)
64, University of Warwick, Department of Economics.
- Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
- Michael Dotsey & Robert G. King, 2006.
"Pricing, Production, and Persistence,"
Journal of the European Economic Association,
MIT Press, vol. 4(5), pages 893-928, 09.
- K. Huang & Z. Liu & L. Phaneuf, . "Staggered contracts, intermediate goods and the dynamic effects of monetary shocks on output, inflation and real wages," Working Papers 2000-20, Utah State University, Department of Economics.
- Cavallo, Michele & Ghironi, Fabio, 2002.
"Net foreign assets and the exchange rate: Redux revived,"
Journal of Monetary Economics,
Elsevier, vol. 49(5), pages 1057-1097, July.
- Michele Cavallo & Fabio Ghironi, 2000. "Net Foreign Assets and the Exchange Rate: Redux Revived," Boston College Working Papers in Economics 505, Boston College Department of Economics, revised 01 Feb 2002.
- Ludger Linnemann, 1999. "Sectoral and aggregate estimates of the cyclical behavior of markups: Evidence from Germany," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 135(3), pages 480-500, September.
- Floden, Martin, 2000. "Endogenous monetary policy and the business cycle," European Economic Review, Elsevier, vol. 44(8), pages 1409-1429, August.
- Kevin X. D. Huang & Zheng Liu, 2001. "Input-Output Structure and Nominal Staggering: The Persistence Problem Revisited," Cahiers de recherche CREFE / CREFE Working Papers 145, CREFE, Université du Québec à Montréal.
- Michael Gail, 2001. "Persistency and Money Demand Distortions in a Stochastic DGE Model with Sticky Prices," Volkswirtschaftliche DiskussionsbeitrÃ¤ge 96-01, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht, revised 14 Feb 2003.
- Robert King & Alexander L. Wolman, 1999. "What Should the Monetary Authority Do When Prices Are Sticky?," NBER Chapters, in: Monetary Policy Rules, pages 349-404 National Bureau of Economic Research, Inc.
- Michael Dotsey & Robert G. King & Alexander L. Wolman, 1999. "State-Dependent Pricing And The General Equilibrium Dynamics Of Money And Output," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 655-690, May.
- Taylor, John B, 1980.
"Aggregate Dynamics and Staggered Contracts,"
Journal of Political Economy,
University of Chicago Press, vol. 88(1), pages 1-23, February.
- Ali Dib & Louis Phaneuf, 2001. "An Econometric U.S. Business Cycle Model with Nominal and Real Rigidities," Cahiers de recherche CREFE / CREFE Working Papers 137, CREFE, Université du Québec à Montréal.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).
If references are entirely missing, you can add them using this form.