Basic New Keynesian Model with monetary & technology shocks

Dynare contributions and examples
1

Dear forum,

the attached mod file contains a basic New Keynesian Model with monetary and technology shocks. It’s based on the 2008 textbook of Jordi Galí.
Money demand is ad-hoc.
The central bank follows the Taylor rule.
The shocks follow AR(1) processes.

I compared my simulations against those of Galí and am confident that the model should be all right.
If you find any trouble, please let me know.

Regards,
Johannes
BNKM.mod (3.54 KB)

2

I run your mod file , and I’ve obtained these S.S. results:
STEADY-STATE RESULTS:

y 0
pi 0
i 0.080126
a 0
rn 0.080126
n 0
m -0.320504
v 0

question: what’s the meaning of a negative demand for money in this case?

3

I wish someone’d say something about this, since I think that there must be a mistake in the model, but one never knows, perhaps someone could give a reasonable interpretation to those s.s. values…

4

Hi, as the model description says, the model is in logs. As the actual steady state money demand is apparently between 0 and 1, its log is a negative number.

5

Hi, I have a question regarding the code.
When it is defined the model, first, second and fourth equations use “y” as the notation for the output gap (referring to the Gali textbook), while in fifth equation is just output (at least on the book).
The fifth equation is the production function, and if we want to write it in terms of output gap, i think it should be different.
Am I wrong?
Bests
Carmine

6

[quote=“Carmine”]Hi, I have a question regarding the code.
When it is defined the model, first, second and fourth equations use “y” as the notation for the output gap (referring to the Gali textbook), while in fifth equation is just output (at least on the book).
The fifth equation is the production function, and if we want to write it in terms of output gap, i think it should be different.
Am I wrong?
Bests
Carmine[/quote]

I think they are the same in Logarithm linear.

7

I have also run the module and ended up with the same results Bubba_Smith shared here. Does this means you have to patch up your module to the right one? I am little confused. Hope you will share what to do next about this.

LOuren
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