On Modeling the Effects of Inflation Shocks: Comments and Some Further Evidence
AbstractFair (2002) argues that New Keynesian models are wrong in predicting that an inflation shock has contractionary effects only if it raises the real interest rate, and that a coefficient on inflation higher than one in the Taylor rule is a necessary condition for stability. While Fair uses his macroeconometric model as a benchmark to evaluate the predictions of the standard New Keynesian framework, we adopt a VAR supported by models in that framework, and the model of Rudebusch and Svensson (1999). The findings are broadly in line with Fair's.
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Bibliographic InfoArticle provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.
Volume (Year): 3 (2003)
Issue (Month): 1 (January)
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Web page: http://www.degruyter.com
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- Shaun K. Roache & Alexander P. Attie, 2009. "Inflation Hedging for Long-Term Investors," IMF Working Papers 09/90, International Monetary Fund.
- Hillinger, Claude & Süssmuth, Bernd, 2008. "The Quantity Theory of Money is Valid. The New Keynesians are Wrong!," Discussion Papers in Economics 6987, University of Munich, Department of Economics.
- Barbara Annicchiarico & Alessandro Piergallini, 2006.
"Inflation shocks and interest rate rules,"
AccessEcon, vol. 5(19), pages 1-7.
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