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Monetary Business Cycle Accounting

  • Sustek, Roman

This paper investigates the quantitative importance of various types of frictions for inflation and nominal interest rate dynamics by extending business cycle accounting to monetary models. Representing a variety of real and nominal frictions as `wedges' to standard equilibrium conditions allows a quantitative assessment of those frictions. Decomposing the data into movements due to these wedges shows that frictions that are equivalent to wedges in TFP and equilibrium conditions for asset markets are essential. In contrast, wedges in equilibrium conditions for capital accumulation and the resource constraint, and wedges capturing distortionary effects of sticky prices, play only a secondary role.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17518.

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Date of creation: 25 Sep 2009
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Handle: RePEc:pra:mprapa:17518
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  18. Espen Henriksen & Finn E. Kydland & Roman Sustek, . "The High Cross-Country Correlations of Prices and Interest Rates," Discussion Papers 11/01, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
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  24. Ellen R. McGrattan, 2001. "Predicting the effects of Federal Reserve policy in a sticky price model: an analytical approach," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
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  28. Suparna Chakraborty, 2005. "Business Cycle Accounting-How important are technology shocks as a propagation mechanism? Some new evidence from Japan," Macroeconomics 0508002, EconWPA.
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