Structural VARs and DSGE models: applications to macroeconomics

by Neri, Stefano

Abstract (Summary)
ABSTRACT Chapter 1 investigates if and how the standard results of the VAR literature on the macroeconomic effects of monetary policy, which typically overlooks fiscal policy, are affected when monetary and fiscal policy are jointly considered. To this end, structural VAR models are set up using U.S. post-war data. It is found that the magnitude of the responses of output and price to a monetary policy shock are halved once fiscal policy is considered. Both monetary and fiscal policy shocks have small effects on output and the prices. Chapter 2 evaluates the effects of monetary policy shocks on stock market indices in the G-7 countries and Spain using structural VARs. A contractionary shock has a negative and transitory effect on stock market indices. In Chapter 3 a limited participation model with households trading in stocks is set up and validated by means of impulse responses using U.S. data. The model is able to account for the empirical response of stock prices to monetary policy shocks. Chapter 4 compares three alternative models of the business cycle that rely on sticky prices and real rigidities in the form of adjustment costs for investment. In the first model these costs arise endogenously as the result of asymmetric information and agency costs. In the second model the costs for adjusting the level of investment are exogenously imposed while in the last model these costs are imposed on the changes in investment. The models are estimated with maximum likelihood using U.S. post-war data. The model with exogenous adjustment costs on the level of investment seems to provide the best representation of the U.S. business cycle and the responses to technology and monetary policy shocks.
This document abstract is also available in Spanish.
Bibliographical Information:

Advisor:Fabio Canova

School:Universitat Pompeu Fabra

School Location:Spain

Source Type:Master's Thesis

Keywords:economia i empresa


Date of Publication:09/05/2003

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