Theoretical and Empirical Contributions to Monetary Policy Analysis

Junicke, M. (2013). Theoretical and Empirical Contributions to Monetary Policy Analysis. (Unpublished Doctoral thesis, City University London)

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Abstract

This thesis collects three different contributions to monetary macroeconomics, covering both theoretical and empirical aspects. First chapter builds on the DSGE models of New Keynesian tradition, and studies monetary policy around a non efficient steady state. Using a two-stage approach developed by Levine, McAdam, and Pearlman (2007), I show that in the presence of backward looking firms, the central planner improves social welfare when it allows for a steady state rate of inflation marginally above zero. In the second chapter, I estimate a simple two-country DSGE model to study the behaviour of the Eastern European central banks, obtaining some innovative important results. First, a simple monetary policy rule mimicking an optimal rule together with the assumption about the existence of non-zero steady state rate of inflation deliver a significantly better to the data. Furthermore, the empirical hypothesis that central banks systematically target CPI inflation rather than PPI inflation is rejected for all the investigated Eastern European countries (EEC). In the third chapter, I use a Bayesian VAR with economically interpretable structural restrictions and zero restrictions on lags, to analyse the transmission channels of external shocks to an extended set of EEC. I study to what extent monetary policy shocks originating from the US and from Germany can explain fluctuations on Eastern European markets. To carry out the Bayesian inference, I use a Gibbs sampling approach. I find that the US monetary policy influences the EEC macroeconomic variables at least as much as its German counterpart.

Item Type: Thesis (Doctoral)
Subjects: H Social Sciences > HB Economic Theory
Divisions: School of Social Sciences > Department of Economics
URI: http://openaccess.city.ac.uk/id/eprint/12242

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