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Business Cycle and Monetary Policy Analysis in a Structural Sticky- Price Model of The Euro Area

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Abstract

Structural models are a powerful tool for business cycle and monetary policy analysis because they are assumed to be invariant to either policy changes or external shoxks. In this paper, we derive a neoclassical monetary model in which both the demand and supply side are setructural in the sense that the behavioral equations obtaind are regorously calculated from optimizing decisions of the individuals. Moerover, we introduce price stickiness on the supply side decisions so as to have relevant short-run real effects of monetary policy through the rreal interest rate channel. The resulting medium-size model will be calibrated and estimated for the euro area economies. As two examples of the applications of the model for the euro area, some simulations on business cycle and monetary policy analysis will be carried out.

Suggested Citation

  • Miguel Casares, 2001. "Business Cycle and Monetary Policy Analysis in a Structural Sticky- Price Model of The Euro Area," Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra 0109, Departamento de Economía - Universidad Pública de Navarra.
    • Handle: RePEc:nav:ecupna:0109
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    Cited by:

    1. Smets, Frank & Wouters, Raf, 2002. "An estimated stochastic dynamic general equilibrium model of the euro area," Working Paper Series 0171, European Central Bank.
    2. Smets, Frank & Wouters, Raf, 2002. "Openness, imperfect exchange rate pass-through and monetary policy," Journal of Monetary Economics, Elsevier, vol. 49(5), pages 947-981, July.
    3. Frank Smets & Raf Wouters, 2002. "Monetary policy in an estimated stochastic dynamic general equilibrium model of the Euro area," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
    4. Lippi, Francesco & Neri, Stefano, 2003. "Information Variables for Monetary Policy in a Small Structural Model of the Euro Area," CEPR Discussion Papers 4125, C.E.P.R. Discussion Papers.
    5. Luca Brugnolini & Luisa Corrado, 2018. "Fiscal Compact and Debt Consolidation Dynamics," CEIS Research Paper 436, Tor Vergata University, CEIS, revised 06 Nov 2018.
    6. Juan Paez-Farrell, 2003. "The New Keynesian Phillips Curve: Some Counterfactual Evidence," Macroeconomics 0312003, University Library of Munich, Germany.
    7. Smets, Frank & Wouters, Raf, 2002. "An estimated stochastic dynamic general equilibrium model of the euro area," Working Paper Series 171, European Central Bank.
    8. Frank Smets & Raf Wouters, 2003. "An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1123-1175, September.
    9. Kutu Adebayo Augustine & Ngalawa Harold, 2017. "Monetary Policy and Industrial Output in the BRICS Countries: A Markov-Switching Model," Folia Oeconomica Stetinensia, Sciendo, vol. 17(2), pages 35-55, December.
    10. Sandra Gomes, 2004. "Monetary Policy in a Currency Union with National Price Asymmetries," Working Papers w200416, Banco de Portugal, Economics and Research Department.
    11. Dorofeenko, Viktor & Lee, Gabriel S. & Salyer, Kevin D., 2005. "Agency Costs and Investment Behavior," Economics Series 182, Institute for Advanced Studies.
    12. Juan Paez-Farrell, 2003. "Monetary Policy and Business Cycle Analysis in an Optimising Model with Expectations Lags," Macroeconomics 0312002, University Library of Munich, Germany.
    13. Smets, Frank & Wouters, Raf, 2002. "Openness, imperfect exchange rate pass-through and monetary policy," Journal of Monetary Economics, Elsevier, vol. 49(5), pages 947-981, July.

    More about this item

    Keywords

    optimizing dynamic models; sticky prices; business cycle; Taylor rules;
    All these keywords.

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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