Monetary and Fiscal Policy in an Estimated DSGE Model for Morocco

Mossadak, Anas (2013): Monetary and Fiscal Policy in an Estimated DSGE Model for Morocco. Published in: British Journal of Science 1 , Vol. 9, No. 1 (2013): pp. 1-17.

Abstract

In this study we estimate a Dynamic Stochastic General Equilibrium (DSGE) model using Bayesian techniques to analyse the effects of monetary and fiscal policy in Morocco. The results suggest that a positive monetary policy shock generates a diminution of consumption, investment, output and inflation. A positive shock on government expenditures produces an increase in output and wage but generates also a decrease in private consumption and investment due to an increase in inflation and interest rate. Finally, a positive shock on capital tax produces a decrease in investment and thus in output. In general, the duration of monetary shock is shorter than fiscal shock; the first vanishes in about 10 quarters and the latter is more persistent and lasts more than 15 quarters.

• Item Type: MPRA Paper
• Language: English
• Keywords: DSGE, NKM, bayesian estimation, monetary policy, fiscal policy, impulses responses.
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C63 - Computational Techniques ; Simulation Modeling; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies

References

Abraham-Frois, G., La macroéconomie en l'an 2000, Revue économique, 2001, Volume 52, Numéro3, p. 481 – 493

Bernanke, B., and Gertler, M., Inside the Black Box: The Credit Channel of Monetary Policy Transmission, Journal of Economic Perspectives, Vol. 9, 1995, p 24-48.

Blanchard, O., et Khan, C. M.,The solution of linear difference models under rational expectation , Econometrica, vol. 48 (5) (July), 1980, pp. 1305-11.

Calvo, G., “Staggered prices in a utility maximising framework”, Journal of Monetary Economics,1983.

Christiano, L. , Eichenbaum M., et Evans C., Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," Journal of Political Economy, 2005,113, 1-45.

Clarida, R., Gali, J., et Gertler, M., The science of monetary policy: a new Keynesian Perspective , Journal of Economic Literature, 37:4,1999, p. 1661-1707.

Collard, F., et Juillard, M., Perturbation Methods for Rational Expectations Models, Manuscript, CEPREMAP,2001.

Canova, F., Methods for Applied Macroeconomic Research, Princeton University Press, 2005.

Dib, A., Gammoudi, M. et Moran, K., Forecasting Canadian Time Series with the New Keynesian Model, Bank of Canada, Working Paper 05-27,2006.

Gali, J., Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework, Prinston University Press, 2008.

Gali, J., et Rabanal, P., Technology Shocks and Aggregate Fluctuations: How Well Does the RBC Model Fit Postwar U.S. Data, NBER Macroeconomics Annual, 2004, MIT Press, Cambridge, MA.

Goodfriend, M., et King, R., The new neoclassical synthesis and the role of monetary policy , Bernanke, B. and J. Rotemberg (eds), NBER Macroeconomics Annual, 1997, 231-283.

Hansen, G., Indivisible Labor and the Business Cycle, Journal of Monetary Economics, 1985, 309-328.

Ireland, P., Technology Shocks in the New Keynesian Model, The Review of Economics and Statistics,2004,p 923-936.

Iwata, I., Fiscal Policy in an Estimated DSGE Model of the Japanese Economy: Do Non-Ricardian Households Explain All?, ESRI Discussion Paper Series No.216, 2009.

Judd, K., Numerical Methods in Economics, Cambridge, MA: MIT Press, 1998.

Juillard M., Dynare: A Program for the Resolution and Simulation of Dynamic Models with Forward Variables through the Use of a Relaxation Algorithm, CEPREMAP Working Paper 9602, CEPREMAP Paris,1996.

Kamran, D., The evolution of macroeconomic theory and policy, Springer, 2009.

King, R., Plosser, C., et Rebelo, S., Production, Growth and Business Cycles: the Basic Neoclassical Model, Journal of Monetary Economics,1988, 195- 232.

King, R., et Rebelo S., Resuscitating real business cycles , NBER Working Paper Series, 2000.

Kydland, F. et Prescott E., Time to Build and Aggregate Fluctuations, Econometrica, 1982, p. 1345-1369.

Kydland, F. et Prescott, E., Business Cycles: Real Facts and a Monetary Myth, Federal Reserve Bank of Minneapolis Quarterly Review, 1990.

Lucas, R., Econometric policy evaluation: À critique, Carnegie-Rochester Conference Series on Public Policy, Vol. 6, 1976, pages 19-46.

Miranda, M. J. et Fackler P. L., Applied Computational Economics and Finance, Cambridge MA: MIT Press, 2002.

Sargent, T. J., Dynamic Macroeconomic Theory, Cambridge, Mass.: Harvard University Press, 1987.

Smets, F. et Wouters, R., An estimated dynamic stochastic general equilibrium model of the euro area, Journal of the European Economic Association, 2003, p.1123-75.

Zanetti, F., Prototype micro-founded DSGE models in Scilab, Bank of England, CCBS, Technical Handbook No. 3, 2010.

Wickens M., Macroeconomic theory: a dynamic general equilibrium approach, Princeton University Press, 2009.

Woodford, M., Interest and Prices: Foundations of a Theory of Monetary Policy, Princeton University Press,2003.

Woodford, M., The Taylor Rule and Optimal Monetary Policy, American Economic Review, 2001, p 232-237.