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
Blanchard’s 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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