Role of money in monetary business cycle: comparison of the czech and american results
| Authors | |
|---|---|
| Year of publication | 2005 |
| Type | Article in Proceedings |
| Conference | Liberecké ekonomické fórum |
| MU Faculty or unit | |
| Citation | |
| Field | Economy |
| Keywords | Business cycle; Monetary policy; Linearized DSGE model; solution of DSGE model; Kalman Filter with log likelihood optimalization |
| Description | In recent years has been developed new approach of the maximum likelihood estimation of the business cycle models incorporating rational expectations based on the method of the Blanchard and Kahn by Peter N. Ireland. These models examine an accurate and complete description of money's role in the monetary business cycle. Ireland has estimated the model with quarterly time-series data from the post-1980 United States economy. He concluded that the money plays a minimal role in shaping the dynamic behavior of output and inflation. It was a stimulus to verify result with the Czech Republic data. The results obtained indicate that the Czech Republic data gives similar results as post-1980 United States data. The model's parameters suggest that money also plays a nonessential role in the monetary business cycle. But the impulse response is a little bit different, mainly a technology shock. What and why is similar or different for the estimates? That is the question addressed here. The paper begins by presenting small New Keynesian DSGE model. It goes on to show the estimated model with quarterly time-series data of the Czech and the USA economy. The model's parameters are estimated by maximum likelihood, as described by Hamilton. The Kalman filter is used to evaluate the negative log likelihood function for the model of money's role. |
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