Evaluating a monetary business cycle model with unemployment for the euro area

Release date
01/09/2009
Reference
DP2009/08
Author
Nicolas Groshenny
This paper estimates a medium-scale DSGE model with search unemployment by matching model and data spectra. Price markup shocks emerge as the main source of business-cycle fluctuations in the euro area. Key for the propagation of these disturbances are a high degree of inflation ndexation and a persistent response of monetary policy to deviations of inflation from the target.