Giannoulakis, Stylianos (2017): Fiscal and Monetary Policy in a New Keynesian Model with Tobin’s Q Investment Theory Features.
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Abstract
The purpose of this article is to carefully lay out the internal monetary and fiscal transmission mechanisms in the context of a New Keynesian model, with a particular focus on the role of capital - the most vital ingredient in the transition from the basic framework to the medium - scale DSGE models. The key concept of this paper is the form of the monetary policy: we assume a two-channel monetary policy, i.e. it is conducted through a rule for money supply and a Taylor-type rule for interest rates, in order to keep up with the ECB and Fed’s policies. We also adopt a simple fiscal policy rule for public consumption to examine the interactions between fiscal and monetary policy. Finally, in order to capture the crisis effects we introduce exogenous shocks to both monetary and fiscal policy rules.
Item Type: | MPRA Paper |
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Original Title: | Fiscal and Monetary Policy in a New Keynesian Model with Tobin’s Q Investment Theory Features |
English Title: | Fiscal and Monetary Policy in a New Keynesian Model with Tobin’s Q Investment Theory Features |
Language: | English |
Keywords: | Transmission Mechanisms; New Keynesian Model; Tobin’s Q; Two-Channel Monetary Policy |
Subjects: | E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E37 - Forecasting and Simulation: Models and Applications 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 > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy ; Stabilization ; Treasury Policy |
Item ID: | 83259 |
Depositing User: | Dr Stelios Giannoulakis |
Date Deposited: | 12 Dec 2017 15:56 |
Last Modified: | 27 Sep 2019 04:12 |
References: | Calvo, G., 1983, “Staggered prices in a utility-maximizing framework”, Journal of Monetary Economics, Vol. 12 (3), pp. 383-398. Christiano, L.J., Eichenbaum, M., and Evans, C.L., 2005, “Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy”, Journal of Political Economy, Vol. 113 (1), pp. 1–45. Cooley, T., and Prescott, E., 1995, “Frontiers of Business Cycle Research”, chapter 1, Princeton University Press. Del Negro, M., and Sims, C. A., 2015. "When does a central bank׳s balance sheet require fiscal support?," Journal of Monetary Economics, Elsevier, Vol. 73(C), pp. 1-19. Gali, J., 2008, “Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework and Its Applications”, Princeton University Press. Gali, J., Smets, F., and Wouters, R., 2011, “Unemployment in an Estimated New Keynesian Model.” NBER Working Paper, no. 17084. Heer, B., and Maußner, A., 2014, “Q-Targeting in New Keynesian Models.” Mimeo. University of Augsburg. Lucas, R., 1987, “Models of business cycles”, New York: Basil Blackwell editions. Poutineau, J. C., Sobczak, K., and Vermandel, G., 2015, “The analytics of the New Keynesian 3-equation Model”, Economics and Business Review, Vol. 1 (15), pp. 110–129. Prescott, E.C., 1986, “Theory Ahead of Business Cycle Measurement.” Federal Reserve Bank of Minneapolis Quarterly Review, No. 10, pp. 9–22. Smets, F., and Wouters, R., 2003, “An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area”, Journal of the European Economic Association, Vol. 1 (5), pp. 1123–1175. Taylor, J., 1993, “Discretion versus Policy Rules in practice", Carnegie-Rochester Conference Series on Public Policy, Vol. 39, pp. 195-214. Tobin, J., 1958, “Estimation of Relationships for Limited Dependent Variables”, Econometrica, Vol. 26 (1), pp. 24-36. |
URI: | https://mpra.ub.uni-muenchen.de/id/eprint/83259 |
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Fiscal and Monetary Policy in a New Keynesian Model with Tobin’s Q Investment Theory Features. (deposited 21 Aug 2017 22:11)
- Fiscal and Monetary Policy in a New Keynesian Model with Tobin’s Q Investment Theory Features. (deposited 12 Dec 2017 15:56) [Currently Displayed]