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An Estimated Canadian DSGE Model with Nominal and Real Rigidities

  • Ali Dib
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This paper develops a dynamic, stochastic, general-equilibrium (DGSE) model for the Canadian economy and evaluates the real effects of monetary policy shocks. To generate high and persistent real effects, the model combines nominal frictions in the form of costly price adjustment with real rigidities modelled as convex costs of adjusting capital and employment. The structural parameters identifying transmission channels are estimated econometrically using a maximum-likelihood procedure with a Kalman filter. The estimated nominal and real rigidities impart substantial real and persistent effects following a monetary policy shock. Furthermore, the results show that the monetary authority has accommodated technology shocks and has successfully insulated the Canadian economy from demand-side disturbances, by responding to technology and money demand shocks.

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File URL: http://www.bankofcanada.ca/wp-content/uploads/2010/02/wp01-26a.pdf
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Paper provided by Bank of Canada in its series Working Papers with number 01-26.

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Length: 53 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:bca:bocawp:01-26
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Web page: http://www.bank-banque-canada.ca/

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  1. Galí, Jordi, 1996. "Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations?," CEPR Discussion Papers 1499, C.E.P.R. Discussion Papers.
  2. repec:nbr:nberre:0126 is not listed on IDEAS
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  7. 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.
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  17. Burnside, Craig & Eichenbaum, Martin & Rebelo, Sergio, 1993. "Labor Hoarding and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 245-73, April.
  18. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-66, September.
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  25. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
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