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Money and risk in a DSGE framework: A Bayesian application to the Eurozone

  • Benchimol, Jonathan
  • Fourçans, André

We present and test a model of the Eurozone, with a special emphasis on the role of risk aversion and money. The model follows the New Keynesian DSGE framework, money being introduced in the utility function with a non-separability assumption. Money is also introduced in the Taylor rule. By using Bayesian estimation techniques, we shed light on the determinants of output, inflation, money, interest rate, flexible-price output, and flexible-price real money balance dynamics. The role of money is investigated further. Its impact on output depends on the degree of risk aversion. Money plays a minor role in the estimated model. Yet, a higher level of risk aversion would imply that money had significant quantitative effects on business cycle fluctuations.

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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 34 (2012)
Issue (Month): 1 ()
Pages: 95-111

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Handle: RePEc:eee:jmacro:v:34:y:2012:i:1:p:95-111
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

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  1. Money in Wikipedia English ne '')
  2. McCallum rule in Wikipedia English ne '')
  3. Regla de Taylor in Wikipedia Spanish ne '')
  4. Monetary policy in Wikipedia English ne '')
  5. Monnaie in Wikipedia French ne '')
  6. André Fourçans in Wikipedia French ne '')
  7. Politica monetaria in Wikipedia Italian ne '')
  8. Robert E. Lucas in Wikipedia French ne '')
  9. New Keynesian economics in Wikipedia English ne '')
  10. Demand for money in Wikipedia English ne '')
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  12. User:The Transhumanist/Sandbox05 in Wikipedia English ne '')
  13. Nominal income target in Wikipedia English ne '')

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