Money's Function in the Czech Monetary Business Cycle

Analysts have devoted considerable time and effort towards developing new and improved models for monetary policy evaluation. These newly developed models differ considerably in details. Do these existing models provide an accurate and complete description of money's role in the monetary business cycle? That is the question addressed here. The paper begins by constructing small New Keynesian DSGE model. It goes on to estimate the model with quarterly time-series data of the Czech economy. Maximum likelihood estimates of the model's parameters suggest that money plays a nonessential role in the Czech monetary business cycle. The Kalman filter was used to evaluate negative log likelihood function of the model.