Econometrics analysis of a cash-in-advance model

by Lai, Hung-Pin.

The goal of this dissertation is to illustrate how the standard cash-in-advance model can be adapted to study the role of monetary and technology shocks in business cycles, and the analysis presented can also be easily extended to variety of dynamic stochastic equilibrium models. I derived a linearized CIA model that provides a link between the deep parameters and model coefficients. Through the linearized model I then assess the empirical performance of the theoretical model and estimate the deep parameters. The 90% confidence intervals of the deep parameters are also obtained by a bootstrap approach. The effects of the monetary and technology shocks are further analyzed by innovation response analysis. Finally, the distortional effects of the Hodrick- Prescott and rational square-wave filters are also examined. iii