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Some UK evidence on the Forward Looking IS Equation:

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Author Info
Paul Turner () (Dept of Economics, Loughborough University)

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Abstract

This paper seeks to demonstrate that a backward looking specification of the IS curve using UK data can encompass the forward looking model recently discussed by Kara and Nelson (2004). By relaxing the restriction that the interest rate and the inflation rate enter the IS curve with coefficients of equal magnitude but opposite sign, we obtain IS curve estimates which are empirically plausible and which encompass the rival specification.

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File URL: http://www.lboro.ac.uk/departments/ec/RePEc/lbo/lbowps/Turner_IS-Curve_July_2007.pdf
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Publisher Info
Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2007_16.

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Date of creation: May 2007
Date of revision: May 2007
Handle: RePEc:lbo:lbowps:2007_16

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Related research
Keywords: IS curve; forward looking; real interest rate.;

Find related papers by JEL classification:
E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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References listed on IDEAS
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. Bennett T. McCallum, 2001. "Should Monetary Policy Respond Strongly to Output Gaps?," American Economic Review, American Economic Association, vol. 91(2), pages 258-262, May. [Downloadable!] (restricted)
    Other versions:
  2. Glenn D. Rudebusch & Lars E. O. Svensson, 1998. "Policy rules for inflation targeting," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
    Other versions:
  3. Charles Goodhart & Boris Hofmann, 2005. "The IS curve and the transmission of monetary policy: is there a puzzle?," Applied Economics, Taylor and Francis Journals, vol. 37(1), pages 29-36, January. [Downloadable!] (restricted)
  4. Ray C. Fair, 2002. "On Modeling the Effects of Inflation Shocks," The B.E. Journal of Macroeconomics, Berkeley Electronic Press, vol. 0(1). [Downloadable!]
  5. Arturo Estrella & Jeffrey C. Fuhrer, 2002. "Dynamic Inconsistencies: Counterfactual Implications of a Class of Rational-Expectations Models," American Economic Review, American Economic Association, vol. 92(4), pages 1013-1028, September. [Downloadable!]
    Other versions:
  6. Arturo Estrella & Jeffrey C. Fuhrer, 2003. "Monetary Policy Shifts and the Stability of Monetary Policy Models," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 94-104, 01. [Downloadable!] (restricted)
  7. Robert G. King, 2000. "The new IS-LM model : language, logic, and limits," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 45-103. [Downloadable!]
  8. Ray C. Fair, 2001. "On Modeling the Effects of Inflation Shocks," Cowles Foundation Discussion Papers 1300, Cowles Foundation, Yale University, revised Mar 2002. [Downloadable!]
  9. Davidson, James E H, et al, 1978. "Econometric Modelling of the Aggregate Time-Series Relationship between Consumers' Expenditure and Income in the United Kingdom," Economic Journal, Royal Economic Society, vol. 88(352), pages 661-92, December. [Downloadable!] (restricted)
  10. S. G. B Henry & A. R. Pagan, 2004. "The Econometrics of the New Keynesian Policy Model: Introduction," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(s1), pages 581-607, 09. [Downloadable!] (restricted)
  11. Amit Kara & Edward Nelson, 2004. "International Evidence on the Stability of the Optimizing IS Equation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(s1), pages 687-712, 09. [Downloadable!] (restricted)
    Other versions:
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