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The Monetary Transmission in the US and the Euro Area: Common Features and Common Frictions

  • Nuno Alves
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    This paper compares the monetary transmission mechanism in the US and the 3 largest economies of the euro area. We start by showing that the dynamic responses to a monetary policy shock in each of the four countries are analogous. A model with a small set of frictions that broadly accounts for these responses is then presented. The model incorporates nominal wage contracts, habits for preferences in consumption and the staggered adjustment of households. portfolios. A common characterization of the monetary transmission mechanism in the US and the main euro area countries is therefore attainable.

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    File URL: http://www.bportugal.pt/en-US/BdP%20Publications%20Research/WP200414.pdf
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    Paper provided by Banco de Portugal, Economics and Research Department in its series Working Papers with number w200414.

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    Date of creation: 2004
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    Handle: RePEc:ptu:wpaper:w200414
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    1. Mark Bils & Peter J. Klenow, 2002. "Some Evidence on the Importance of Sticky Prices," NBER Working Papers 9069, National Bureau of Economic Research, Inc.
    2. Erceg, Christopher J. & Henderson, Dale W. & Levin, Andrew T., 2000. "Optimal monetary policy with staggered wage and price contracts," Journal of Monetary Economics, Elsevier, vol. 46(2), pages 281-313, October.
    3. Ciccarelli, Matteo & Rebucci, Alessandro, 2004. "Has the Transmission Mechanism of European Monetary Policy Changed in the Run-Up to EMU?," CEPR Discussion Papers 4535, C.E.P.R. Discussion Papers.
    4. Fuerst, Timothy S., 1992. "Liquidity, loanable funds, and real activity," Journal of Monetary Economics, Elsevier, vol. 29(1), pages 3-24, February.
    5. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
    6. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1997. "Modeling money," Working Paper Series, Macroeconomic Issues WP-97-17, Federal Reserve Bank of Chicago.
    7. Lawrence J. Christiano & Jonas D. M. Fisher, 2003. "Stock Market and Investment Goods Prices: Implications for Macroeconomics," NBER Working Papers 10031, National Bureau of Economic Research, Inc.
    8. Amato, Jeffery D. & Laubach, Thomas, 2003. "Estimation and control of an optimization-based model with sticky prices and wages," Journal of Economic Dynamics and Control, Elsevier, vol. 27(7), pages 1181-1215, May.
    9. Ignazio Angeloni & Anil K. Kashyap & Benoit Mojon & Daniele Terlizzese, 2003. "Monetary Transmission in the Euro Area: Does the Interest Rate Channel Explain it All?," NBER Working Papers 9984, National Bureau of Economic Research, Inc.
    10. Rochelle Edge & Thomas Laubach, 2003. "The Optimal Monetary Policy Response to Shifts in Trend MFP Growth: A DGE Analysis," Computing in Economics and Finance 2003 93, Society for Computational Economics.
    11. Mojon, BenoƮt & Peersman, Gert, 2001. "A VAR description of the effects of monetary policy in the individual countries of the euro area," Working Paper Series 0092, European Central Bank.
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