Assessing Sticky Price Models Using the Burns and Mitchell Approach
AbstractThis paper evaluates sticky-price models using the methods proposed by Burns and Mitchell, focusing on the monetary aspects of the business cycle. Recent research has emphasised the responses of models to shocks at the expense its systematic component. Whereas sticky-price models have been successful at replicating impulse response functions from VARs, this paper highlights that they are unable to mimic the data for nominal variables. Moreover, the results are robust to the specification of the Phillips curve, including its backward-looking variant; calibrated values and the inclusion of fiscal policy shocks. Since being able to mimic the data is the lowest hurdle a model must pass, these results pose a challenge for New Keynesian-type models.
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Bibliographic InfoPaper provided by Cardiff University, Cardiff Business School, Economics Section in its series Cardiff Economics Working Papers with number E2006/17.
Length: 27 pages
Date of creation: Mar 2006
Date of revision:
Publication status: Forthcoming in Applied Economics
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Web page: http://business.cardiff.ac.uk/research/academic-sections/economics/working-papers
More information through EDIRC
New Keynesian Models; Business Cycles; Correlations; Burns and Mitchell;
Other versions of this item:
- Juan Paez-Farrell, 2008. "Assessing sticky price models using the Burns and Mitchell approach," Applied Economics, Taylor & Francis Journals, vol. 40(11), pages 1387-1397.
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-03-25 (All new papers)
- NEP-CBA-2006-03-25 (Central Banking)
- NEP-MAC-2006-03-25 (Macroeconomics)
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