Does money matter for the identification of monetary policy shocks: A DSGE perspective

Céline Poilly (1)

1 Department of Economics

This paper investigates how the identification assumptions of monetary policy shocks modify the inference in a standard DSGE model. Considering SVAR models in which either the interest rate is predetermined for money or money and the interest rate are simultaneously determined, two DSGE models are estimated by Minimum Distance Estimation. The estimation results reveal that real balance effects are necessary to replicate the high persistence implied by the simultaneity assumption. In addition, the estimated monetary policy rule is sensitive to the identification scheme. This suggests that the way money is introduced in the identification scheme is not neutral for the estimation of DSGE models.

Mots clés: SVAR model; DSGE model; Non recursive identification; Money

Domaines: Économie et finance quantitative [q-fin]

Céline Poilly. Does money matter for the identification of monetary policy shocks: A DSGE perspective. Journal of Economic Dynamics and Control, 2010, 34 (10), pp.2159. ⟨10.1016/j.jedc.2010.05.019⟩. ⟨hal-00732759⟩