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A NOTE ON THE REAL EFFECTS OF MONETARY SHOCKS: A LIMITED PARTICIPATION MODEL

Published online by Cambridge University Press:  07 June 2012

Pedro J. Gutiérrez
Affiliation:
Universidad de Valladolid
Carlos R. Palmero
Affiliation:
Universidad de Valladolid
Corresponding
E-mail address:

Abstract

This paper presents a monetary stochastic general equilibrium model that allows the real cyclical movements of the economy to be explained as a consequence of exogenous monetary, public spending, and technology shocks. The model is calibrated and simulated, and its accuracy in replicating the cyclical movements in the real variables is compared with that of the standard real business cycle (RBC) model. We find that our model fits the observed data better than the existing RBC models, especially for the labor market.

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Copyright © Cambridge University Press 2012 

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