Endogenous Money or Sticky Wages: A Bayesian Approach
This paper attempts to answer question similar to that asked by Ireland (2003): What explains the correlations between nominal and real variables in postwar US data? More precisely, this paper aims to investigate whether endogenous money, sticky wages, or some combination of the two, are necessary features in a dynamic New Keynesian model in explaining the correlations between nominal and real variables in postwar US data. To do so, we estimate a medium-scale dynamic stochastic general equilibrium model of endogenous money. The model is estimated using Bayesian maximum likelihood and compared with a restricted version of the structural model, in which wages are flexible. We conclude that both endogenous money and sticky wages are necessary features in a dynamic New Keynesian model in explaining the variation in key macroeconomic variables, both nominal and real.
|Date of creation:||2010|
|Contact details of provider:|| Postal: Newlands on Main, F0301 3rd Floor Mariendahl House, cnr Campground and Main Rds, Claremont, 7700 Cape Town|
Phone: 021 671-3980
Fax: +27 21 671 3912
Web page: http://www.econrsa.org/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:rza:wpaper:175. 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: (Charles Tanton)
If references are entirely missing, you can add them using this form.