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| Author: | Andres, J. Lopez-Salido, J. D. Valles, J. |
| Title: | Money in an estimated business cycle model of the euro area |
| Journal: | Economic Journal
2006 : APR, VOL. 116:511, p. 457-477 |
| Index terms: | euro interest rates money prices |
| Freeterms: | bulk of price |
| Language: | eng |
| Abstract: | This article discusses the role of money in a small-scale dynamic general equilibrium model of the euro area estimated by maximum likehood. The author suggests that this model allows for both intertemporal and intra-temporal non-separability in preferences. The results suggest that real balances do not affect the marginal utility of consumption, also money demand shocks mainly help to forecast real balances while real shock explain the bulk of price, output and interest rates fluctuation. Furthermore, the calculation of the natural rate of interest reveals that the evolution of the interest rate is mostly accounted for by the real sources of fluctuations. |
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