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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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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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Keywords: monetary models; federal funds;

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Cited by:
  1. Cogan, John F. & Taylor, John B. & Wieland, Volker & Wolters, Maik Hendrik, 2013. "Fiscal consolidation strategy: An update for the budget reform proposal of march 2013," IMFS Working Paper Series, Institute for Monetary and Financial Stability (IMFS), Goethe University Frankfurt 68, Institute for Monetary and Financial Stability (IMFS), Goethe University Frankfurt.
  2. Cogan, John F. & Taylor, John B. & Wieland, Volker & Wolters, Maik H, 2012. "Fiscal Consolidation Strategy," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9041, C.E.P.R. Discussion Papers.
  3. Orphanides, Athanasios & Wieland, Volker, 2012. "Complexity and monetary policy," CFS Working Paper Series, Center for Financial Studies (CFS) 2012/11, Center for Financial Studies (CFS).
  4. Tomas Havranek & Marek Rusnak, 2012. "Transmission Lags of Monetary Policy: A Meta-Analysis," Working Papers IES, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies 2012/27, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2012.
  5. Schmidt, Sebastian & Wieland, Volker, 2012. "The new keynesian approach to dynamic general equilibrium modeling: Models, methods, and macroeconomic policy evaluation," IMFS Working Paper Series, Institute for Monetary and Financial Stability (IMFS), Goethe University Frankfurt 52, Institute for Monetary and Financial Stability (IMFS), Goethe University Frankfurt.
  6. Ceri Davies & Max Gillman & Michal Kejak, 2012. "Deriving the Taylor Principle when the Central Bank Supplies Money," CEU Working Papers, Department of Economics, Central European University 2012_13, Department of Economics, Central European University, revised 23 Jul 2012.

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