An Assessment on the Monetary Business Cycle Theory
Öz
In recent years, considerable attention has given to analyzing the business cycle in terms of money. Many researchers have developed dynamic stochastic general equilibrium models that generate business cycle facts and guide for making monetary policy decisions. The aim of this study is to investigate how the persistence of total factor productivity (TFP) and money growth shocks drive the business cycles within an economy. To achieve this aim, we employ a monetary business cycle model with a cash-in-advance constraint, as in Cooley and Hansen (1995). Our results indicate that the volatility of macroeconomic variables is higher when the persistence of TFP shocks is greater compared to that of money growth shocks. Furthermore, TFP shocks seem to have a more significant role in driving variability within the models compared to money growth shocks. This is demonstrated by the higher percentage of variance decomposition attributed to TFP shocks, except in the case of consumption variability.
Anahtar Kelimeler
TFP shocks, money growth shocks, monetary business cycle model, business cycle
Kaynakça
- Alexopoulos, M. (2011). Read All about It! What Happens Following a Technology Shock? American Economic Review, American Economic Association, vol. 101(4), pages 1144-1179.
- Ball, L. & Romer, D. (1990). Real Rigidities and the Non-neutrality of Money,” The Review of Economic Studies, 57(2), 183–203.
- Bergin, P. R. (2003). Putting the New Open Economy Macroeconomics to a Test. Journal of International Economics 60, 3–34.
- Blanchard, O., and J. Gali (2007). Real Wage Rigidities and the New Keynesian Model. Journal of Money, Credit, and Banking, supplement to vol. 39, 1, 35–66.
- Canova, F. & Menz, T. (2011). Does Money Matter in Shaping Domestic Business Cycles? An International Investigation. Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(4), pages 577-607.
- Chari, V.V., Kehoe, P.J. & McGrattan, E.R. (1996). Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem? Federal Reserve Bank of Minneapolis, Research Department Staff Report, vol. 217.
- Christiano, L., M. Eichenbaum, and C. Evans. (2005). Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy. Journal of Political Economy, 113(1): 1–45.
- Cooley, T. F. & Hansen, G. D. (1989). The Inflation Tax in a Real Business Cycle Model. American Economic Review, American Economic Association, vol. 79(4), pages 733-748.
- Cooley, T. F. & Hansen, G. D. (1998). The Role of Monetary Shocks in Equilibrium Business Cycle Theory: Three Examples. European Economic Review, Elsevier, vol. 42(3-5), pages 605-617.
- Cooley, T.F. & Prescott, E.C. (1995). Economic Growth and Business Cycles, Cooley, T.F., editor, Frontiers of Business Cycle Research, Princeton University Press, Chapter 1.
