We compare two methods of motivating money in New Keynesian DSGE Models: Money-in-the-utility function and cash-in-advance constraint, as well as two ways of modelling monetary policy: interest rate feedback rule and money growth rules. As an aid to model selection, we use a new econometric...

We examine the influence of financial asset market structure for the volatility of the real exchange rate. Adding distribution costs to two-country two-sector models has been shown to increase the volatility of the terms of trade and thus the real exchange rate. We argue that incomplete markets...