Comparing the Monetary Policies of the Fed and the ECB: A New Keynesian Approach

Master Thesis by Arda Ozcan
August 2, 2007

Abstract:

In this paper a Dynamic Stochastic General Equilibrium (DSGE)
model is described for the closed and open economy case with
incomplete exchange pass-through in the so-called "New Keynesian"
framework following Christiano, Eichenbaum and Evans (2005) and
Adolfson, Laseen, Linde and Villiani (2007), respectively. The main
focus of this paper are the differences and similarities between US
and EU monetary policies. A less important focus is attributed to the
implications of open and closed economy models in monetary policy
analysis. The models are solved and log-linearized and finally calibrated
based on Smets and Wouters (2004a, 2004b,2007). We found that
monetary transmission has similar for US and EU in both models.