Monetary policy in the New-Keynesian model: An application to the Euro Area

C. Moons, H. Garretsen, B. van Aarle*, J. Fornero

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

This paper analyzes monetary policy in a stylized new-keynesian model. A number of issues are focused upon: (i) optimal monetary policy under commitment or discretion versus ad-hoc monetary policy based on simple rules, (ii) the effects of fiscal policies and foreign variables on monetary policy, (iii) the effects of fiscal deficit and interest rate smoothing objectives and the role of forward-backward linkages in the model. The model is estimated for the euro area. Using simulations of the estimated model, it is analyzed how these aspects might affect monetary policy of the ecb and macroeconomic fluctuations in the euro area.
Original languageEnglish
Pages (from-to)879-902
JournalJournal of Policy Modeling
Volume29
Issue number6
DOIs
Publication statusPublished - 1 Jan 2007

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