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Term structure and the estimated monetary policy rule in the Eurozone

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  • Ramón María-Dolores

    ()

  • Jesús Vázquez

Abstract

In this paper we estimate a standard version of the New Keynesian Monetary (NKM) model augmented with term structure in order to analyze two issues. First, we analyze the effect of introducing an explicit term structure channel in the NKM model on the estimated parameter values of the model, with special emphasis on the interest rate smoothing parameter using data for the Eurozone. Second, we study the ability of the model to reproduce some stylized facts such as highly persistent dynamics, the weak comovement between economic activity and inflation, and the positive, strong comovement between interest rates observed in actual Eurozone data. The estimation procedure implemented is a classical structural method based on the indirect inference principle.

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Bibliographic Info

Article provided by Springer in its journal Spanish Economic Review.

Volume (Year): 10 (2008)
Issue (Month): 4 (December)
Pages: 251-277

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Handle: RePEc:spr:specre:v:10:y:2008:i:4:p:251-277

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Related research

Keywords: NKM model; Term structure; Policy rule; Indirect inference; C32; E30; E52;

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Cited by:
  1. Vázquez, Jesús & María-Dolores, Ramón & Londoño, Juan-Miguel, 2013. "On the informational role of term structure in the US monetary policy rule," Journal of Economic Dynamics and Control, Elsevier, vol. 37(9), pages 1852-1871.
  2. Nicolas Pinkwart, 2013. "Quantifying The European Central Bank'S Interest Rate Smoothing Behavior," Manchester School, University of Manchester, vol. 81(4), pages 470-492, 07.

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