IDEAS home Printed from https://ideas.repec.org/p/cte/werepe/we076235.html
   My bibliography  Save this paper

The role of search frictions for output and inflation dynamics: a Bayesian assessment

Author

Listed:
  • Menner, Martin

Abstract

Search frictions in the goods market have proven to be a fruitful deviation from the fiction of a centralized Walrasian market providing a micro-foundation of the use of money as a medium of exchange. Moreover, persistent propagation of monetary shocks can arise in search-theoretic monetary models through the interaction of search-frictions in the goods and labor markets, and inventory holdings. Here, a search-theoretic monetary DSGE model with capital and inventory investment is estimated, and its implications on output and inflation dynamics are contrasted with those of standard flexible price monetary models: a cash-in-advance and a portfolio adjustment cost model. Model estimation and comparison is conducted in a Bayesian way in order to account for possible model misspecification. The search model can track inflation and output data better, as well as it dominates the other models in the ability to predict the autocorrelations of inflation and the persistent disinflation process after a technology shock. It generates a hump-shaped but not strong enough output response to a monetary shock. Current and near current correlations between output growth inflation are predicted well.

Suggested Citation

  • Menner, Martin, 2007. "The role of search frictions for output and inflation dynamics: a Bayesian assessment," UC3M Working papers. Economics we076235, Universidad Carlos III de Madrid. Departamento de Economía.
  • Handle: RePEc:cte:werepe:we076235
    as

    Download full text from publisher

    File URL: https://e-archivo.uc3m.es/bitstream/handle/10016/939/we076235.pdf?sequence=1
    Download Restriction: no

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alfonso Rosa García & Hubert Janos Kiss & Ismael Rodríguez Lara, 2009. "Do social networks prevent bank runs?," Working Papers. Serie AD 2009-25, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    2. Elena Márquez & Belén Nieto Doménech & Gonzalo Rubio Irigoyen, 2010. "Consumption, liquidity and the cross-sectional variation of expected returns," Working Papers. Serie AD 2010-24, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    3. José M. Jiménez Gómez & María del Carmen Marco Gil & Pedro Gadea Blanco, 2010. "Some game-theoretic grounds for meeting people half-way," Working Papers. Serie AD 2010-04, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    4. Ramón Faulí-Oller, 2009. "Mergers of retailers with limited selling capacity," Working Papers. Serie AD 2009-26, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    5. Cuberes, David & Dougan, William, 2009. "How Endogenous Is Money? Evidence from a New Microeconomic Estimate," MPRA Paper 17744, University Library of Munich, Germany.
    6. Mossay, P. & Picard, P.M., 2011. "On spatial equilibria in a social interaction model," Journal of Economic Theory, Elsevier, vol. 146(6), pages 2455-2477.
    7. Sonia Oreffice & Climent Quintana, 2009. "Anthropometry and Socioeconomics in the Couple: Evidence from the PSID," Working Papers 2009-22, FEDEA.
    8. José J. Sempere Monerris & Rafael Moner Colonques & Amparo Urbano Salvador, 2010. "Trade liberalization in vertically related markets," Working Papers. Serie AD 2010-09, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    9. Empar Pons Blasco & Luisa Escriche Bertolín, 2009. "Who moves up the career ladder? A model of gender differences in job promotion," Working Papers. Serie AD 2009-23, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    10. José M. Jiménez Gómez, 2010. "Noncooperative justifications for old bankruptcy rules," Working Papers. Serie AD 2010-15, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    11. Francesco Serti & Roberto Leombruni & Tiziano Razzolini, 2010. "The pecuniary and non-pecuniary costs of job displacement. An evaluation of the post-displacement injury rate," Working Papers. Serie AD 2010-12, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    12. Carolina Silva Cassorla, 2010. "The interaction of minimum wage and severance payments in a frictional labor market: theory and estimation," Working Papers. Serie AD 2010-22, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    13. Patricia Cubí Mollá, 2010. "Scaling methods for categorical self-assessed health measures," Working Papers. Serie AD 2010-01, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    14. Aurora Gómez Galvarriato & Cesar Guerrero-Luchtenberg, 2010. "Timing of protectionism," Working Papers. Serie AD 2010-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).

    More about this item

    Keywords

    Monetary search-theory;

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E19 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Other
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E49 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Other
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cte:werepe:we076235. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ana Poveda). General contact details of provider: http://www.eco.uc3m.es/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.