Year
2012
Authors
FOURÇANS André, BENCHIMOL J.
Abstract
We present and test a model of the Eurozone, with a special emphasis on the role of risk aversion and money. The model follows the New Keynesian DSGE framework, money being introduced in the utility function with a non-separability assumption. Money is also introduced in the Taylor rule. By using Bayesian estimation techniques, we shed light on the determinants of output, inflation, money, interest rate, flexible-price output, and flexible-price real money balance dynamics. The role of money is investigated further. Its impact on output depends on the degree of risk aversion. A high enough level of risk aversion would imply that money had significant quantitative effects on business cycle fluctuations.
BENCHIMOL, J. et FOURÇANS, A. (2012). Money and Risk in a DSGE Framework: A Bayesian Application to the Eurozone. Journal of Macroeconomics, 34(1), pp. 95-111.