On the (ir)relevance of direct supply-side effects of monetary policy

Vasco Gabriel, Paul Levine (), Christopher Spencer and Bo Yang
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Christopher Spencer: University of Surrey

No 408, School of Economics Discussion Papers from School of Economics, University of Surrey

Abstract: The relevance of direct supply-side effects of monetary policy in a New Keynesian DSGE model is studied. We extend a model with several nominal and real frictions by introducing a cost channel of monetary transmission and allowing for non-separability of money and consumption in the utility of the representative household. These fea- tures have important theoretical consequences for the output-inflation trade-off and indeterminacy of interest rate rules. The empirical evidence for these effects are then examined using a Bayesian maximum likelihood framework complemented with GMM single-equation estimation. Both estimation strategies point to weak evidence for the cost channel and non-separable utility.

Keywords: New Keynesian model; Bayesian maximum likelihood estimation; GMM; non-separable utility; cost channel. (search for similar items in EconPapers)
JEL-codes: C11 E42 E52 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2008-06
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac, nep-mon and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:sur:surrec:0408

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