 Dynamic response to monetary shocks in a search model of the labor marketRevista de Economía del Rosario, 2002, No 2386 Abstract: This paper studies the dynamic response of a few key macroeconomic variables to each one of three exogenous shocks: monetary, government spending and technological shocks. By using a cash in advance model with two market frictions, one in the intermediation of loanable funds, and one i the labor market, we address the ability of the model to simulate data embedded with the same dynamic response to shocks observed in historical data(i.e we estimate dynamic multipliers to exogenous shocks by estimating a VARX model to both sets of data). We find evidence on the short run expasionary effects of monetary policy and we highlight the importance of studying the real interest rate dynamics as opposed to the nominal interest rate. In terms of the former we do observe a countercyclical movement of money and interest rates, while in term of the latter, we don´t. We also find a good performance of the model in tracing out the dynamic response of output after any one of the three shocks. Investment and employment dynamics are well reproduced when the economy is subject to government spending or technological shocks. We make a case for using this particular validation technique as a complementary alternative for testing the performance of calibrated dynamic general equilibrium models. Keywords: Monetary Policies rules; labor search (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:col:000151:002386 Access Statistics for this article More articles in Revista de Economía del Rosario from Universidad del Rosario Contact information at EDIRC. |
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