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Assessing predetermined expectations in the standard sticky-price model - a Bayesian approach

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Author Info
Peter Welz () (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)

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Abstract

This paper analyses the empirical performance of a New Keynesian sticky-price model with delayed effects of monetary impulses on inflation and output for the German pre-EMU economy. The model is augmented with rule-of-thumb behaviour in consumption and price setting. Using recently developed Bayesian estimation techniques, endogenous persistence is found to play a dominant role in consumption whereas forward-looking behaviour is greater for inflation. The model’s dynamics following a monetary shock and a preference shock are comparable to those of an identified VAR model. JEL Classification: E43; E52; C51.

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Paper provided by European Central Bank in its series Working Paper Series with number 621.

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Length: 51 pages
Date of creation: May 2006
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Handle: RePEc:ecb:ecbwps:20060621

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Keywords: DSGE-Model; identified VAR; predetermined expectations; Bayesian estimation.;

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Peter McAdam & Alpo Willman, 2007. "State-dependency and firm-level optimization - a contribution to Calvo price staggering," Working Paper Series 806, European Central Bank. [Downloadable!]
  2. Eric Mayer & Oliver Grimm, 2008. "Countercyclical Taxation and Price Dispersion," Economics working paper series 08/88, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  3. Brzoza-Brzezina, Michal & Kot, Adam, 2008. "The Relativity Theory Revisited: Is Publishing Interest Rate Forecasts Really so Valuable?," MPRA Paper 10296, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  4. Paolo Vitale, 2006. "A market microstructure analysis of foreign exchange intervention," Working Paper Series 629, European Central Bank. [Downloadable!]
    Other versions:
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