Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/84843 
Year of Publication: 
2003
Series/Report no.: 
Darmstadt Discussion Papers in Economics No. 119
Publisher: 
Technische Universität Darmstadt, Department of Law and Economics, Darmstadt
Abstract: 
The monetary transmission mechanism plays an important role in studying the effects of monetary policy on the real side of the economy. At least since Chari et al. (2000) it is generally accepted that new keynesian models of the business cycle display a persistence problem. In this paper, we follow the approach of Walsh (2002) and include search unemployment in a dynamic new keynesian model of the business cycle in order to study the effects of a monetary shock. After deriving the equilibrium solution of the model, we study the behavior of the impulse response functions due to a monetary shock. To complete our analysis we confront the results of our simulation to time series data for the U.S., U.K. and Germany. Our main result is that the introduction of search unemployment does improve the capability of the model to reproduce some stylized facts of the monetary transmission mechanism, however to a less extent than expected.
Subjects: 
Search Unemployment
Monetary Shocks
Business Cycles
JEL: 
E24
E32
J40
J63
Document Type: 
Working Paper

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