This dissertation explores the relationship between monetary policy and economic fluctuations within the context of dynamic stochastic general equilibrium (DSGE) models. I use Bayesian maximum likelihood methods to estimate the structural parameters of such models for the United States (U.S.) and 23 emerging market economies. Using these structural parameter estimates I conduct counterfactual experiments to explore the economic implications of alternative monetary policy regimes.;The first chapter estimates an open economy monetary DSGE model of South Africa to characterize the South African Reserve Bank's (SARB) monetary policy rule. I find that the SARB has a stable monetary policy rule very much in line with those estimated for Australia, Canada, New Zealand, and UK. The distinguishing characteristics of the SARB's rule relative to these other four countries are a somewhat larger weight on output and a very low weight on the exchange rate. Relative to other 20 emerging market economies, the policy reaction function of the SARB appears to be much more stable.;The second chapter analyzes the fiscal and monetary policy responses and their effects on output in a set of 22 external financial crisis episodes occurred since 1990. I find evidence that those countries that tightened monetary and fiscal policy during these crises experienced larger output contractions than countries that followed a looser policy stance.;The third chapter uses a monetary DSGE model with credit market imperfections to estimate the role of credit market shocks and monetary policy in U.S. business cycles. The estimated model captures much of the historical narrative regarding the conduct of monetary policy and developments in financial markets that led to episodes of financial excess and distress over the last two decades. The estimation suggests that credit market shocks are an important factor behind economic fluctuations accounting for 15% of the variance in real output since 1985. Monetary policy is also an important force behind real output fluctuations explaining 12.5% of its variance.
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