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Monetary Policy in an Estimated DSGE Model with a Financial Accelerator

  • Ali Dib
  • Ian Christensen

This paper estimates a sticky-price DSGE model with a financial accelerator to assess the importance of financial frictions in the amplification and propagation of the effects of transitory shocks. Structural parameters of two models, one with and one without a financial accelerator, are estimated using a maximum-likelihood procedure and post-war US data. The estimation and simulation results provide some quantitative evidence in favour of the financial accelerator model. The financial accelerator appears to play an important role in investment fluctuations, but its importance for output depends on the nature of the initial shock

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File URL: http://repec.org/sce2005/up.321.1107189863.pdf
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Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2005 with number 314.

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Date of creation: 11 Nov 2005
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Handle: RePEc:sce:scecf5:314
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  1. Selim Elekdag & Alejandro Justiniano & Ivan Tchakarov, 2006. "An Estimated Small Open Economy Model of the Financial Accelerator," IMF Staff Papers, Palgrave Macmillan, vol. 53(2), pages 2.
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  4. Ali Dib, 2002. "Nominal Rigidities and Monetary Policy in Canada Since 1981," Working Papers 02-25, Bank of Canada.
  5. Lawrence J. Christiano & Roberto Motto & Massimo Rostagno, 2003. "The Great Depression and the Friedman-Schwartz hypothesis," Proceedings, Federal Reserve Bank of Cleveland, pages 1119-1215.
  6. Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 2001. "Nominal rigidities and the dynamic effects of a shock to monetary policy," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
  7. Bernanke, B. & Gertler, M. & Gilchrist, S., 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," Working Papers 98-03, C.V. Starr Center for Applied Economics, New York University.
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  9. Meier, André & Müller, Gernot J., 2005. "Fleshing out the monetary transmission mechanism: output composition and the role of financial frictions," Working Paper Series 0500, European Central Bank.
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  12. Charles T. Carlstrom & Timothy S. Fuerst, 1996. "Agency costs, net worth, and business fluctuations: a computable general equilibrium analysis," Working Paper 9602, Federal Reserve Bank of Cleveland.
  13. Césaire Meh & Kevin Moran, 2004. "Bank Capital, Agency Costs, and Monetary Policy," Working Papers 04-6, Bank of Canada.
  14. Cooper, Russell & Ejarque, Jo o, 2000. "Financial Intermediation And Aggregate Fluctuations: A Quantitative Analysis," Macroeconomic Dynamics, Cambridge University Press, vol. 4(04), pages 423-447, December.
  15. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
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  18. Peter N. Ireland, 2002. "Endogenous Money or Sticky Prices?," NBER Working Papers 9390, National Bureau of Economic Research, Inc.
  19. Atta-Mensah, Joseph & Dib, Ali, 2008. "Bank lending, credit shocks, and the transmission of Canadian monetary policy," International Review of Economics & Finance, Elsevier, vol. 17(1), pages 159-176.
  20. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 27-48, Fall.
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  23. Peter N. Ireland, 2000. "Sticky-Price Models of the Business Cycle: Specification and Stability," NBER Working Papers 7511, National Bureau of Economic Research, Inc.
  24. Simon Hall, 2001. "Financial accelerator effects in UK business cycles," Bank of England working papers 150, Bank of England.
  25. Russell Cooper & Joao Ejarque, 1994. "Financial Intermediation and Aggregate Fluctuations: A Quantative Analysis," NBER Working Papers 4819, National Bureau of Economic Research, Inc.
  26. repec:cup:macdyn:v:4:y:2000:i:4:p:423-47 is not listed on IDEAS
  27. Richard Clarida & Jordi Gali & Mark Gertler, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," NBER Working Papers 6442, National Bureau of Economic Research, Inc.
  28. Camilo E Tovar, 2006. "Devaluations, output and the balance sheet effect: a structural econometric analysis," BIS Working Papers 215, Bank for International Settlements.
  29. Luis Felipe Céspedes & Roberto Chang & Andrés Velasco, 2004. "Balance Sheets and Exchange Rate Policy," American Economic Review, American Economic Association, vol. 94(4), pages 1183-1193, September.
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