In the Smets-Wouters DSGE Model, the Financial Friction Is Introduced $\bar { m }$

question 77

Multiple Choice

In the Smets-Wouters DSGE model, the financial friction is introduced by a(n) :

• A) "wedge" between consumer interest rates and the federal funds rate
• B) discount rate greater than one
• C) large risk premium
• D) monetary policy parameter ( \(\bar { m }\) ) equal to zero
• E) breakdown in the Taylor rule

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Milton Friedman

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