TY - JOUR
T1 - Determination of the equilibrium expansion rate of money when money supply is driven by a time-homogeneous Markov modulated jump diffusion process
AU - Soriano-Morales, Yazmín V.
AU - Venegas-Martínez, Francisco
AU - Vallejo-Jiménez, Benjamín
N1 - Publisher Copyright:
© 2015. All Rights Reserved.
PY - 2015
Y1 - 2015
N2 - This paper is aimed at developing a general equilibrium model useful to determine the equilibrium expansion rate of money supply in a small open stochastic economy. The marginal change of money supply incorporates stylized facts in emerging economies reported in empirical literature such as regime switches in volatility and unexpected sudden jumps (interventions). To model these essentials, money supply will be driven by a time-homogeneous Markov modulated jump diffusion process. Under this framework, it is found that the expansion rate of money supply depends on the current exchange rate depreciation, the interest rate, the average size on the jump process, and the regime switching in volatility. The proposed model allows using the Monte Carlo method to simulate the average path of the equilibrium expansion rate of money.
AB - This paper is aimed at developing a general equilibrium model useful to determine the equilibrium expansion rate of money supply in a small open stochastic economy. The marginal change of money supply incorporates stylized facts in emerging economies reported in empirical literature such as regime switches in volatility and unexpected sudden jumps (interventions). To model these essentials, money supply will be driven by a time-homogeneous Markov modulated jump diffusion process. Under this framework, it is found that the expansion rate of money supply depends on the current exchange rate depreciation, the interest rate, the average size on the jump process, and the regime switching in volatility. The proposed model allows using the Monte Carlo method to simulate the average path of the equilibrium expansion rate of money.
UR - http://www.scopus.com/inward/record.url?scp=85015982130&partnerID=8YFLogxK
M3 - Artículo
AN - SCOPUS:85015982130
SN - 1545-2921
VL - 35
SP - 2074
EP - 2084
JO - Economics Bulletin
JF - Economics Bulletin
IS - 4
ER -