This paper develops and estimates a dynamic stochastic general equilibrium (DSGE) model with sticky prices and wages for the euro area. The model incorporates various other features such as habit formation, costs of adjustment in capital accumulation and variable capacity utilisation. It is...

The study involved extending a dynamic general equilibrium neoKeynesian model by considering preferences that exhibit intertemporal nonhomotheticity. Introducing this feature generates a state-dependent intertemporal elasticity of substitution, which induces asymmetric shifts in aggregate demand...

This paper asks whether relations of the IS-LM type can sensibly be used for the aggregate demand portion of a dynamic optimizing general equilibrium model intended for analysis of issues regarding monetary policy and cyclical fluctuations. The main result is that only one change -- the addition...

Empirical evidence documents a low pass-through of exchange rate changes to consumer prices in the short-run under a flexible exchange rate regime and the existence of relative price differentials across countries under a fixed exchange rate regime. Whether a two-country model is consistent with...

We develop a behavioral macroeconomic model in which agents use simple but biased rules to forecast future output and inflation. This model generates endogenous waves of optimism and pessimism (quot;Animal Spiritsquot;) that are generated by the correlation of biased beliefs. We contrast the...