In the Smets-Wouters DSGE model presented in the text, contractionary monetary policy has the largest impact on hours worked.

Question

Quizplus · Accepted Answer

In the Smets-Wouters DSGE model, contractionary monetary policy primarily affects output and inflation, with a more indirect and typically smaller impact on labor variables such as hours worked. The model emphasizes the interaction between monetary policy and macroeconomic variables, where the direct effects are more pronounced on aggregate demand and price levels.

In the Smets-Wouters DSGE Model Presented in the Text, Contractionary