Analysis of monetary policy responses after financial market crises in a continuous time New Keynesian Model

Arbeitspapier

We develop a dynamic stochastic full equilibrium New Keynesian model of two open economies based on stochastic differential equations to analyse the interdependence between monetary policy and financial markets in the context of the recent financial crisis. The effect of bubbles on stock and housing markets and their transmission to the domestic real economy and the contagious effects on foreign markets are studied. We simulate adjustment paths for the economies under two monetary policy rules: an open-economy Taylor rule and a modified Taylor rule, which takes into account stabilisation of financial markets as a monetary policy objective. We find that for the price of a strong hike in inflation a severe economic recession can be avoided under the modified rule. Using Bayesian estimation techniques, we calibrate the model to the case of the United States and Canada and find that the resulting economic adjustment paths are similar to those of the theoretical model.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: MAGKS Joint Discussion Paper Series in Economics ; No. 21-2014

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Mathematical Methods ; Computational Techniques; Simulation Modeling ; Financial Markets and the Macroeconomy ; Money and Interest Rates: Forecasting and Simulation: Models and Applications ; Monetary Policy ; Open Economy Macroeconomics
• Thema: New Keynesian Models ; Financial Crisis ; Dynamic Stochastic Full Equilibrium Continuous Time Model ; Taylor Rule

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Hayo, Bernd ; Niehof, Britta
• Ereignis: Veröffentlichung
• (wer): Philipps-University Marburg, Faculty of Business Administration and Economics
• (wo): Marburg
• (wann): 2014

Weitere Informationen

• Handle: http://hdl.handle.net/10419/95896
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ