In the DSGE framework “A monetary policy shock will have more persistent effects under Calvo price-setting than under Taylor price-setting”. Discuss the effects of the monetary policy shock on all the endogenous variables in the models. Derive the relevant equations in both models and use these to show how the shock impacts on each variable, the links between the variables and how they contribute to the overall persistence described the be impulse responses to the shock. Comment on the economic intuitions driving the equations”
The above question is between an assignment and an essay, meaning that it requires mostly technical work based on the models,but NO introduction and conclusion because it has to be mostly derivations with economic intuition next to them, explain step by step each line. It has to be someone who specialises in MACRO new Keynesian dynamic stochastic general equilibrium models, cause is specific also it is for an economics technical master. Also can i get a UK writer, who specialises in Macro DSGE models, would be easy for them to get the difference in notation.
Important: There is notation differences in books, articles ext, the derivations written have to be done with the same notations as in my university(which is similar to the Romer Advance Macro book,but there are still some differences, i am sending you all the lecture notes for the whole year you obviously dont need them all but i cant separate only the relevant parts,because it is one file, but one can quickly see the relevant parts.At nearly the end of that file, just before the seminars and advice for exams there are derivations as well as relevant equations; but with skipped lines in the lecture notes as well and is just given a final result for example: taylor vs calvo yt=λ1yt-1 , pt=λ1pt-1+(1-λ1)m ,
λ1 taylor= 1-√ γ /1+√γ ;
λ calvo= ρ+(1- ρ)^2(1-γ ) λ1 Calvo /1- ρλ1 Calvo, but no derivation how they derived it to get there. there are missing parts, please make sure don’t just copy equations from the lectures, you can use main equation but then derive it you show your working through the equations – provide as much detailed working as possible(which should be some part of the words) as you go from line to line – and make some comments on the interpretation of the equations you derive.
it is really important to use the notation we use in the lecture notes. All other step by step to show the derivation necessary in both models and then show how the monetary policy shock impacts on the all the endogenous variables, first could show how it impacts on the output persistence and explain that degree of persistence is different depending on the value of γ, but this only explains output persistence. The question asks about effectS therefore the effect on GDP ( output gap) and inflation effect is also needed BUT to find inflation persistence one has to look at NKPC (SRAS) for both models, and how they differ as well i think. A good start is also the articles you would find some of the readings, but not all in the reading list first few pages of the lecture notes, for ex. Dixon, Huw and Kara “How to compare Taylor and Calvo contracts” but note this just show output persistence, but those derivations to get to that result are also needed. Then of course also has to be derived equations to show the overall persistence GDP and inflation. If you have any additional questions, ask me.
Answer all parts of the question, which is in the title.
If you need some articles i can send you, i need at least five references (why using specifically those derivations , ext, where ideas are generated)
I could also send you some articles if you need them
