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Surprising Comparative Properties of Monetary Models: Results from a New Model Database

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  • John B. Taylor

    (Stanford University and Hoover Institution)

  • Volker Wieland

    (University of Frankfurt)

Abstract

In this paper, we investigate the comparative properties of empirically estimated monetary models of the U.S. economy using a new database of models designed for such investigations. We focus on three representative models due to Christiano, Eichenbaum, and Evans (2005), Smets and Wouters (2007), and Taylor (1993a). Although these models differ in terms of structure, estimation method, sample period, and data vintage, we find surprisingly similar economic impacts of unanticipated changes in the federal funds rate. However, optimized monetary policy rules differ across models and lack robustness. Model averaging offers an effective strategy for improving the robustness of policy rules. © 2012 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00220
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Bibliographic Info

Article provided by MIT Press in its journal Review of Economics and Statistics.

Volume (Year): 94 (2012)
Issue (Month): 3 (August)
Pages: 800-816

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Handle: RePEc:tpr:restat:v:94:y:2012:i:3:p:800-816

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Web page: http://mitpress.mit.edu/journals/

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Keywords: monetary models; federal funds;

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References

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Citations

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Cited by:
  1. Cogan, John F. & Taylor, John B. & Wieland, Volker & Wolters, Maik Hendrik, 2012. "Fiscal consolidation strategy," IMFS Working Paper Series 61, Institute for Monetary and Financial Stability (IMFS), Goethe University Frankfurt.
  2. Orphanides, Athanasios & Wieland, Volker, 2012. "Complexity and monetary policy," CFS Working Paper Series 2012/11, Center for Financial Studies (CFS).
  3. Tomas Havranek & Marek Rusnak, 2012. "Transmission Lags of Monetary Policy: A Meta-Analysis," Working Papers IES 2012/27, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2012.
  4. Schmidt, Sebastian & Wieland, Volker, 2013. "The New Keynesian Approach to Dynamic General Equilibrium Modeling: Models, Methods and Macroeconomic Policy Evaluation," Handbook of Computable General Equilibrium Modeling, Elsevier.
  5. Davies, Ceri & Gillman, Max & Kejak, Michal, 2012. "Deriving the Taylor Principle when the Central Bank Supplies Money," Cardiff Economics Working Papers E2012/20, Cardiff University, Cardiff Business School, Economics Section.

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