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Author/Editor:
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Khramov, Vadim
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Publication Date:
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March 01, 2012
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Electronic Access:
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Free Full text
(PDF file size is 660KB).
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.
The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
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Summary:
The simulated results of this paper show that New Keynesian DSGE models with capital accumulation can generate substantial persistencies in the dynamics of the main economic variables, due to the stock nature of capital. Empirical estimates on U.S. data from 1960:I to 2008:I show the response of monetary policy to inflation was almost twice lower than traditionally considered, as capital accumulation creates an additional channel of influence through real interest rates in the production sector. Versions of the model with indeterminacy empirically outperform determinate versions. This paper allows for the reconsideration of previous findings and has significant monetary policy implications.
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Order a print copy
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Series:
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Working Paper No. 12/83
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Subject(s):
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Capital accumulation | Economic models | Monetary policy
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Author's Keyword(s):
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Monetary DSGE Models | Indeterminacy | Capital Accumulation |
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