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A Financial Market Segmented New-Keynesian Macro Model

Hjort, Erik LU (2020) NEKP01 20201
Department of Economics
Abstract
This essay complements the monetary literature by estimation and simulation of a New-Keynesian macro model featuring financial market frictions and long bond portfolio policy. The model is an extended version of the canonical three-equation New-Keynesian model with segmented financial markets distinguishing the short-term money market from the long-term bond market. Our data is U.S. quarterly data spanning between 1996:Q4-2019:Q3. The analysis yields the following findings. The structural estimation delivers a high parameter steering the Fed's easing on the bond market. Credit shocks boost output, prices and short-term interest rates in simulations of the DSGE model, consistent with empirical evidence from our VAR. The impact of... (More)
This essay complements the monetary literature by estimation and simulation of a New-Keynesian macro model featuring financial market frictions and long bond portfolio policy. The model is an extended version of the canonical three-equation New-Keynesian model with segmented financial markets distinguishing the short-term money market from the long-term bond market. Our data is U.S. quarterly data spanning between 1996:Q4-2019:Q3. The analysis yields the following findings. The structural estimation delivers a high parameter steering the Fed's easing on the bond market. Credit shocks boost output, prices and short-term interest rates in simulations of the DSGE model, consistent with empirical evidence from our VAR. The impact of conventional monetary policy shocks is generally stronger than QE shocks. (Less)
Please use this url to cite or link to this publication:
author
Hjort, Erik LU
supervisor
organization
course
NEKP01 20201
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Monetary Policy, Financial Market Segmentation, Credit Conditions, QE, IS Curve
language
English
id
9017678
date added to LUP
2020-08-29 10:40:09
date last changed
2020-08-29 10:40:09
@misc{9017678,
  abstract     = {This essay complements the monetary literature by estimation and simulation of a New-Keynesian macro model featuring financial market frictions and long bond portfolio policy. The model is an extended version of the canonical three-equation New-Keynesian model with segmented financial markets distinguishing the short-term money market from the long-term bond market. Our data is U.S. quarterly data spanning between 1996:Q4-2019:Q3. The analysis yields the following findings. The structural estimation delivers a high parameter steering the Fed's easing on the bond market. Credit shocks boost output, prices and short-term interest rates in simulations of the DSGE model, consistent with empirical evidence from our VAR. The impact of conventional monetary policy shocks is generally stronger than QE shocks.},
  author       = {Hjort, Erik},
  keyword      = {Monetary Policy,Financial Market Segmentation,Credit Conditions,QE,IS Curve},
  language     = {eng},
  note         = {Student Paper},
  title        = {A Financial Market Segmented New-Keynesian Macro Model},
  year         = {2020},
}