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Bank of Finland Research Discussion Papers, Bank of Finland

No 3/2001:
Actual and perceived monetary policy rules in a dynamic general equilibrium model of the euro area

Mika Kortelainen ()

Abstract: We present a dynamic general equilibrium model with some nominal rigidities and calibrate it to euro area data. The most important features of the model include consumption/saving decisions according to Blanchardís stochastic lifetimes approach; valuation of private financial wealth according to the present value of capital income; overlapping Calvo wage contracts in the labour market; and a neoclassical supply side with Cobb-Douglas technology. The model is developed for use in analysing differences between perceived and actual monetary policy rules, which is then done as a means of evaluating the macroeconomic benefits of credibility in monetary policy. General properties of the model are analysed with a variety of simulation experiments.

Keywords: EDGE; rational expectation; DGE models; nominal rigidites; (follow links to similar papers)

78 pages, March 12, 2001

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