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Author: Antoine Devulder Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
Thanks to their internal consistency. DSGE models, built on microecoc behavor, have become prevalenl for business cycle and policy analysis in institutions. The recent crisis and governments' concern about persistent unemployment advocate for mechanism, capturing imperfect adjustments in credit and labor markets. However, popular models such as the one of Smets and Wouters (2003-2007), although unsophisticated in their representation of these markets, are able to replicate the data as well as usual econometric tools. It is thus necessary to question the benefits of including these frictions in theoretical models for operational use.ln this thesis, I address this issue and show that microfounded mechanisms specifiç to labor and credit markets can significantly alter the conclusions based on the use of an estimated DSGE model, fom both a positive and a normative perspective.For this purpose, I build a two-country model of France and the rest of the euro area with exogenous rest of the world variables, and estimate it with and without these two frictions using Bayesian techniques. By contrast with existing models, I propose two improvements of the representation of labor markets. First, following Pissarides (2009), only wages in new jobs are negotiated by firms and workers, engendering stickiness in the average real wage. Second, I develop a set of assumptions to make labor market participation endogenous and unemployment involuntary in the sense that the unemployed workers are worse-off that the employed ones. Yet, including this setup in the estimated model is left for future research.Using the four estimated versions of the model, I undertake a number of analyses to highlight the role of financial and labor market frictions : an historical shock decomposition of fluctuations during the crisis, the evaluation of several monetary policy rules, a counterfactual simulation of the crisis under the assumption of a flexible exchange rate regime between France and the rest of the euro area and, lastly, the simulation of social VAT scenarios.
Author: Antoine Devulder Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
Thanks to their internal consistency. DSGE models, built on microecoc behavor, have become prevalenl for business cycle and policy analysis in institutions. The recent crisis and governments' concern about persistent unemployment advocate for mechanism, capturing imperfect adjustments in credit and labor markets. However, popular models such as the one of Smets and Wouters (2003-2007), although unsophisticated in their representation of these markets, are able to replicate the data as well as usual econometric tools. It is thus necessary to question the benefits of including these frictions in theoretical models for operational use.ln this thesis, I address this issue and show that microfounded mechanisms specifiç to labor and credit markets can significantly alter the conclusions based on the use of an estimated DSGE model, fom both a positive and a normative perspective.For this purpose, I build a two-country model of France and the rest of the euro area with exogenous rest of the world variables, and estimate it with and without these two frictions using Bayesian techniques. By contrast with existing models, I propose two improvements of the representation of labor markets. First, following Pissarides (2009), only wages in new jobs are negotiated by firms and workers, engendering stickiness in the average real wage. Second, I develop a set of assumptions to make labor market participation endogenous and unemployment involuntary in the sense that the unemployed workers are worse-off that the employed ones. Yet, including this setup in the estimated model is left for future research.Using the four estimated versions of the model, I undertake a number of analyses to highlight the role of financial and labor market frictions : an historical shock decomposition of fluctuations during the crisis, the evaluation of several monetary policy rules, a counterfactual simulation of the crisis under the assumption of a flexible exchange rate regime between France and the rest of the euro area and, lastly, the simulation of social VAT scenarios.
Author: Gan-Ochir Doojav Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
Examining the business cycle and the monetary transmission mechanism in a small open economy based on the macroeconomic models is vital for successfully implementing forward-looking and counter-cyclical macroeconomic policies. In the context, this thesis focuses on the importance of various modelling implications (i.e., frictions and shocks) in developing empirically viable small open economy dynamic stochastic general equilibrium (DSGE) models. The thesis comprises three self-contained chapters on formulating, estimating and evaluating the DSGE models using Bayesian methods and data for Australia and the United States (US) (or G7 for Chapter 2), as well as a general thesis introduction and conclusion. Chapter 2 investigates the quantitative role of a cost channel of monetary policy and an uncovered interest rate parity (UIP) modification in an estimated small open economy DSGE model. For this purpose, a small open economy New Keynesian DSGE model developed by Justiniano and Preston (2010a) (i.e., benchmark model for the thesis) is augmented to incorporate the cost channel and the UIP modification based on a forward premium puzzle. The empirical analysis shows that introducing the cost channel and the UIP modification into the estimated model improves its ability to fit business cycle properties of key macroeconomic variables and to account for the empirical evidence on the monetary transmission mechanism. Chapter 3 assesses the importance of news shocks in a small open economy DSGE model for analysing business cycle properties of macroeconomic aggregates, including labour market variables. To this end, the model in Chapter 2 is enlarged in Chapter 3 to include (i) the theory of invoulntary unemployment proposed by Galí (2011), (ii) an endogenous preference shifter, similar to that used by Galí et al. (2011), and (iii) both news (anticipated) and unanticipated components in each structural shock. The results show that the estimated model is able to qualitatively replicate the existing VAR-based results (e.g., Kosaka 2013, Kamber et al. 2014 and Theodoridis and Zanetti 2014) on news driven business cycles, and the presence of news shocks has the potential to improve the model fit. Another important finding is that news shocks have been the main drivers of the Australian business cycle in the inflation-targeting period. Chapter 4 examines the significance of financial frictions and shocks in a small open economy DSGE model for explaining macroeconomic fluctuations. In doing so, Chapter 4 has further extended the model in Chapter 3 to a rich DSGE model in the two-country setting with involuntary unemployment, financial frictions and shocks. The main results include (i) the presence of financial accelerator improves the model fit, (ii) the financial accelerator amplifies and propagates the effects of monetary policy shocks on output, but dampens the effects of technology and labour supply shocks in Australia and the US, and (iii) financial shocks (i.e., shocks to the credit spread) are important for explaining investment and output fluctuations in both countries. Finally, this thesis provides implications for designing macroeconomic policies and building empirically viable open economy DSGE models to analyse the transmission mechanism of monetary policy and the business cycle.
Author: Michel De Vroey Publisher: Cambridge University Press ISBN: 0521898439 Category : Business & Economics Languages : en Pages : 451
Book Description
This book retraces the history of macroeconomics from Keynes's General Theory to the present. Central to it is the contrast between a Keynesian era and a Lucasian - or dynamic stochastic general equilibrium (DSGE) - era, each ruled by distinct methodological standards. In the Keynesian era, the book studies the following theories: Keynesian macroeconomics, monetarism, disequilibrium macro (Patinkin, Leijongufvud, and Clower) non-Walrasian equilibrium models, and first-generation new Keynesian models. Three stages are identified in the DSGE era: new classical macro (Lucas), RBC modelling, and second-generation new Keynesian modeling. The book also examines a few selected works aimed at presenting alternatives to Lucasian macro. While not eschewing analytical content, Michel De Vroey focuses on substantive assessments, and the models studied are presented in a pedagogical and vivid yet critical way.
Author: Davide Debortoli Publisher: International Monetary Fund ISBN: 1484311752 Category : Business & Economics Languages : en Pages : 56
Book Description
Yes, it makes a lot of sense. This paper studies how to design simple loss functions for central banks, as parsimonious approximations to social welfare. We show, both analytically and quantitatively, that simple loss functions should feature a high weight on measures of economic activity, sometimes even larger than the weight on inflation. Two main factors drive our result. First, stabilizing economic activity also stabilizes other welfare relevant variables. Second, the estimated model features mitigated inflation distortions due to a low elasticity of substitution between monopolistic goods and a low interest rate sensitivity of demand. The result holds up in the presence of measurement errors, with large shocks that generate a trade-off between stabilizing inflation and resource utilization, and also when ensuring a low probability of hitting the zero lower bound on interest rates.
Author: David Colander Publisher: Cambridge University Press ISBN: 1139459058 Category : Business & Economics Languages : en Pages : 33
Book Description
Macroeconomics is evolving in an almost dialectic fashion. The latest evolution is the development of a new synthesis that combines insights of new classical, new Keynesian and real business cycle traditions into a dynamic, stochastic general equilibrium (DSGE) model that serves as a foundation for thinking about macro policy. That new synthesis has opened up the door to a new antithesis, which is being driven by advances in computing power and analytic techniques. This new synthesis is coalescing around developments in complexity theory, automated general to specific econometric modeling, agent-based models, and non-linear and statistical dynamical models. This book thus provides the reader with an introduction to what might be called a Post Walrasian research program that is developing as the antithesis of the Walrasian DSGE synthesis.
Author: Antoine Devulder
Author: Antoine Devulder
Author: Yuliya Rychalovská
Author: Yuliya Rychalovská
Author: Rossana Merola
Author: Rossana Merola
Author: Gan-Ochir Doojav
Author: Uluc Aysun
Author: Michel De Vroey
Author: Davide Debortoli
Author: David Colander