Money and Monetary Policy in the Eurozone: An Empirical Analysis During Crises
37 Pages Posted: 14 Dec 2017 Last revised: 31 Mar 2019
Date Written: April 21, 2017
In this paper, we test two models of the Eurozone, with a special emphasis on the role of money and monetary policy during crises. The role of separability between money and consumption is investigated further and we analyse the Euro area economy during three different crises: 1992, 2001 and 2007. We find that money has a rather significant role to play in explaining output variations during crises whereas, at the same time, the role of monetary policy on output decreases significantly. Moreover, we find that a model with non-separability between consumption and money has better forecasting performance than a baseline separable model over crisis periods.
Keywords: Money, Monetary Policy, Dynamic Stochastic General Equilibrium, Crises
JEL Classification: E31, E32, E51, E58
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