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Macroeconomic modelling of monetary policy

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Author Info
Matt Klaeffling () (Zentrum für Europäische Integrationsforschung, Walter-Flex-Str. 3, 53113 Bonn, Germany.)
Abstract

This paper proposes a new paradigm for the analysis of monetary policy. From an econometric point of view this new approach is just as easy to implement as reduced form analysis, but is robust to the Lucas critique. It requires no explicit prior theory and yet it encompasses all standard DSGE models. After introducing this new paradigm I study US monetary policy and look at the nature and the effect of monetary policy, discuss the transmission mechanism and the policy rule implied by the data, and perform counterfactual policy analysis. JEL Classification: C12; E52.

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Paper provided by European Central Bank in its series Working Paper Series with number 257.

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Length: 45 pages
Date of creation: Sep 2003
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Handle: RePEc:ecb:ecbwps:20030257

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Related research
Keywords: DSGE models; VAR models; monetary policy; rational expectations; Lucas critique; empirical time series modelling; applied macroeconomics.;

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